UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

      |X|   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
            EXCHANGE ACT OF 1934

                  For the quarterly period ended March 31, 2001

                         Commission File Number: 1-15607

                      JOHN HANCOCK FINANCIAL SERVICES, INC.
                 Exact name of registrant as specified in charter

          DELAWARE                                      04-3483032
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)

                               John Hancock Place
                           Boston, Massachusetts 02117
                    (Address of principal executive offices)

                                 (617) 572-6000
              (Registrant's telephone number, including area code)

      Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|

      Number of shares outstanding of our only class of common stock as of May
4, 2001:

                                   308,067,506
<PAGE>

PART I    FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                           March 31,
                                                              2001         December 31,
                                                          (Unaudited)         2000
                                                         -----------------------------
                                                                (in millions)
<S>                                                      <C>               <C>
Assets

Investments
Fixed maturities:
   Held-to-maturity--at amortized cost
   (fair value: 2001--$1,940.7; 2000--$11,651.2) ......  $   1,965.5       $  11,888.6
   Available-for-sale--at fair value
   (cost: 2001--$27,688.9; 2000--$15,829.7) ...........     28,289.8          16,061.9
Equity securities:
   Available-for-sale--at fair value
   (cost: 2001--$909.2; 2000--$870.6) .................      1,078.9           1,134.4
   Trading securities--at fair value
   (cost: 2001--$288.6; 2000--$193.4) .................        267.9             231.6
Mortgage loans on real estate .........................      9,004.0           8,969.4
Real estate ...........................................        528.6             519.0
Policy loans ..........................................        437.3             428.6
Short-term investments ................................        220.5             151.9
Other invested assets .................................      1,296.8           1,353.0
                                                         -----------------------------

   Total Investments ..................................     43,089.3          40,738.4

Cash and cash equivalents .............................      1,926.5           2,974.4
Accrued investment income .............................        670.1             586.9
Premiums and accounts receivable ......................        266.1             210.8
Deferred policy acquisition costs .....................      2,536.6           2,528.1
Reinsurance recoverable ...............................      1,905.8           1,958.6
Other assets ..........................................      2,257.4           2,191.3
Closed block assets - Note 5 ..........................      9,984.9           9,710.0
Separate accounts assets ..............................     23,411.6          26,454.8
                                                         -----------------------------

   Total Assets .......................................  $  86,048.3       $  87,353.3
                                                         =============================
</TABLE>

The accompanying notes are an integral part of these unaudited consolidated
financial statements.


                                       2
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

                   CONSOLIDATED BALANCE SHEETS -- (CONTINUED)

<TABLE>
<CAPTION>
                                                                             March 31,
                                                                                2001      December 31,
                                                                             (Unaudited)     2000
                                                                          ---------------------------
                                                                                   (in millions)
<S>                                                                        <C>             <C>
Liabilities and Shareholders' Equity

Liabilities
Future policy benefits ................................................    $  23,513.2     $  22,996.4
Policyholders' funds ..................................................       15,912.3        15,741.1
Unearned revenue ......................................................          689.2           671.3
Unpaid claims and claim expense reserves ..............................          251.5           253.7
Dividends payable to policyholders ....................................          120.5           130.8
Short-term debt .......................................................          265.6           245.3
Long-term debt ........................................................          534.1           534.0
Income taxes ..........................................................          602.3           431.3
Other liabilities .....................................................        2,398.5         1,986.0
Closed block liabilities - Note 5 .....................................       12,180.7        12,035.9
Separate accounts liabilities .........................................       23,411.6        26,454.8
                                                                           ---------------------------

   Total Liabilities ..................................................       79,879.5        81,480.6

Minority interest .....................................................           93.5            93.5

Commitments and contingencies - Note 4

Shareholders' Equity - Note 7
Common stock, $.01 par value; 2.0 billion shares authorized; 315.3
   million shares issued, 308.7 million and 312.0 million shares
   outstanding, respectively ..........................................            3.2             3.2
Additional paid in capital ............................................        5,090.4         5,086.4
Retained earnings .....................................................          868.5           700.6
Accumulated other comprehensive income ................................          330.7            80.8
Treasury stock at cost (6.6 million and 3.0 million shares,
   respectively) ......................................................         (217.5)          (91.8)
                                                                           ---------------------------

   Total Shareholders' Equity .........................................        6,075.3         5,779.2
                                                                           ---------------------------

   Total Liabilities and Shareholders' Equity .........................    $  86,048.3     $  87,353.3
                                                                           ===========================
</TABLE>

The accompanying notes are an integral part of these unaudited consolidated
financial statements.


                                       3
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

                   UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                                                        Three Months Ended
                                                                                             March 31,
                                                                                        2001           2000
                                                                                     ------------------------
                                                                                           (in millions)
<S>                                                                                  <C>           <C>
Revenues
  Premiums .....................................................................     $    862.1    $    531.6
  Universal life and investment-type product charges ...........................          179.7         205.0
  Net investment income ........................................................          781.4         848.6
  Net realized investment and other gains (losses), net of related
    amortization of deferred policy acquisition costs and amounts credited
    to participating pension contract holders ($4.3) and $(0.8),
    respectively) ..............................................................          (26.4)         18.3
  Investment management revenues, commissions and
    other fees .................................................................          151.2         229.3
  Other revenue ................................................................            3.7           2.8
  Contribution from the closed block - Note 5 ..................................           20.3          28.7
                                                                                     ------------------------
     Total revenues ............................................................        1,972.0       1,864.3

Benefits and expenses
  Benefits to policyholders, excluding amounts related to net realized
    investment and other gains (losses) credited to participating
    Pension contract holders ($2.3) and $(2.1), respectively) ..................        1,278.2       1,018.1
  Other operating costs and expenses ...........................................          355.4         425.8
  Amortization of deferred policy acquisition costs, excluding
    amounts related to net realized investment and other gains (losses) ($2.0
    and $1.3, respectively) ....................................................           79.7          44.1
  Dividends to policyholders ...................................................           27.4          65.9
  Demutualization expenses .....................................................             --          16.0
                                                                                     ------------------------

     Total benefits and expenses ...............................................        1,740.7       1,569.9
                                                                                     ------------------------

Income before income taxes and cumulative
  effect of accounting changes .................................................          231.3         294.4
Income taxes ...................................................................           70.6         102.9
                                                                                     ------------------------

Income before cumulative effect of accounting changes ..........................          160.7         191.5

Cumulative effect of accounting changes, net of
  tax - Note 1 .................................................................            7.2            --
                                                                                     ------------------------

Net income .....................................................................     $    167.9    $    191.5
                                                                                     ========================
</TABLE>

The accompanying notes are an integral part of these unaudited consolidated
financial statements.


                                       4
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

           UNAUDITED CONSOLIDATED STATEMENTS OF INCOME -- (CONTINUED)

<TABLE>
<CAPTION>
                                                                                                           Three Months
                                                                Three Months          For the Period      Ended March 31,
                                                                    Ended           February 1 through        2000
                                                               March 31, 2001         March 31, 2000        Pro Forma
                                                               ----------------------------------------------------------
                                                                           (in millions, except per share data)
<S>                                                            <C>                    <C>                      <C>
Basic earnings per common share:

Income before cumulative effect of accounting changes ....     $     0.52             $     0.47               $     0.61

Cumulative effect of accounting changes ..................           0.02                     --                       --
                                                               ----------------------------------------------------------

Net income ...............................................     $     0.54             $     0.47               $     0.61
                                                               ==========================================================

Diluted earnings per common share:

Income before cumulative effect of accounting changes ....     $     0.52             $     0.47               $     0.61

Cumulative effect of accounting changes ..................           0.02                     --                       --
                                                               ----------------------------------------------------------

Net income ...............................................     $     0.54             $     0.47               $     0.61
                                                               ==========================================================

Share data:
Weighted-average shares used in basic earnings
   per common share calculations .........................         311.2                  314.8                    314.8

Dilutive securities:
Stock options ............................................           2.5                    0.2                      0.2
Non-vested stock .........................................           0.1                    0.1                      0.1
                                                               ----------------------------------------------------------

Weighted-average shares used in diluted earnings
   per common share calculations .........................         313.8                  315.1                    315.1
                                                               ==========================================================
</TABLE>


The unaudited pro forma information above gives effect to the Reorganization and
Initial Public Offering referred to in Note 1.


The accompanying notes are an integral part of these unaudited consolidated
financial statements.


                                       5
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

      UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                            AND COMPREHENSIVE INCOME

<TABLE>
<CAPTION>
                                                    Additional            Accumulated Other              Total       Outstanding
                                           Common     Paid In   Retained    Comprehensive  Treasury  Shareholders'     Shares
                                            Stock     Capital   Earnings    Income (Loss)   Stock       Equity      (in thousands)
                                           ---------------------------------------------------------------------------------------
                                                                            (in millions)
<S>                                        <C>       <C>        <C>           <C>          <C>        <C>            <C>
Balance at January 1, 2000 ............    $   --    $     --   $  4,825.0    $ (33.9)     $   --     $  4,791.1            --

Demutualization transaction ...........       2.2     3,373.3     (4,869.0)                             (1,493.5)    212,786.5
Initial public offering ...............       1.0     1,656.7                                            1,657.7     102,000.0

Comprehensive income:
   Net income before demutualization ..                               44.0                                  44.0
   Net income after demutualization ...                              147.5                                 147.5
                                           -------------------------------------------------------------------------------------
   Net income for the period ..........                              191.5                                 191.5

Other comprehensive income, net of tax:
   Net unrealized gains ...............                                          50.6                       50.6
   Foreign currency translation
     adjustment .......................                                           8.2                        8.2
   Minimum pension liability ..........                                          (5.5)                      (5.5)
                                                                                                       ---------
Comprehensive income ..................                                                                    244.8
                                           -------------------------------------------------------------------------------------
Balance at March 31, 2000 .............    $  3.2    $5,030.0   $    147.5    $  19.4      $   --     $  5,200.1     314,786.5
                                           =====================================================================================
</TABLE>

<TABLE>
<CAPTION>
                                                    Additional            Accumulated Other              Total       Outstanding
                                           Common     Paid In   Retained    Comprehensive  Treasury  Shareholders'     Shares
                                            Stock     Capital   Earnings    Income (Loss)   Stock       Equity      (in thousands)
                                           ---------------------------------------------------------------------------------------
                                                                            (in millions)
<S>                                        <C>       <C>        <C>           <C>          <C>        <C>               <C>
Balance at January 1, 2001 ..............  $3.2      $5,086.4   $  700.6      $   80.8     $ (91.8)   $  5,779.2        311,988.9

Options exercised .......................    --           4.0                                                4.0            317.7
Restricted stock issued .................    --            --                       --          --            --             56.0
Treasury stock acquired .................                                                   (125.7)       (125.7)        (3,577.5)

Comprehensive income:
   Net income ...........................                          167.9                                   167.9

Other comprehensive income, net of tax:
   Net unrealized gains (losses) ........                                         48.6                      48.6
   Net accumulated gains (losses)
     on cash flow hedges ................                                         (2.7)                     (2.7)
   Foreign currency translation
     adjustment .........................                                        (23.6)                    (23.6)
Minimum pension liability ...............                                           --                        --
                                                                                                      ----------

Comprehensive income ....................                                                                  190.2
Change in accounting principles .........                                        227.6                     227.6
                                           --------------------------------------------------------------------------------------
Balance at March 31, 2001 ...............  $3.2      $5,090.4   $  868.5      $  330.7     $(217.5)     $6,075.3        308,785.1
                                           ======================================================================================
</TABLE>

The accompanying notes are an integral part of these unaudited consolidated
financial statements.


                                       6
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

                 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                               Three Months Ended
                                                                                                    March 31,
                                                                                              2001            2000
                                                                                          -------------------------
                                                                                                 (in millions)
<S>                                                                                       <C>            <C>
Cash flows from operating activities:
   Net income ......................................................................      $    167.9     $    191.5
   Adjustments to reconcile net income to net cash provided by operating activities:
     Amortization of discount - fixed maturities ...................................           (36.0)         (26.7)
     Realized investment and other (gains) losses, net .............................            26.4          (18.3)
     Change in deferred policy acquisition costs ...................................           (60.1)         (93.6)
     Depreciation and amortization .................................................            21.8           24.6
     Net cash flows from trading securities ........................................           (36.3)        (145.7)
     Increase in accrued investment income .........................................           (83.2)         (43.2)
     Increase in premiums and accounts receivable ..................................           (55.3)         (62.5)
     (Increase) decrease in other assets and other liabilities, net ................          (207.6)         272.2
     Increase in policy liabilities and accruals, net ..............................           480.3          247.6
     Increase in income taxes ......................................................           232.3          102.9
     Initial cash transferred to the closed block ..................................              --         (158.6)
     Contribution from the closed block ............................................           (20.3)         (28.7)
                                                                                          -------------------------

           Net cash provided by operating activities ...............................           429.9          261.5

Cash flows from investing activities:
   Sales of:
     Fixed maturities available-for-sale ...........................................         4,960.6        1,178.9
     Equity securities available-for-sale ..........................................            59.1           42.2
     Real estate ...................................................................             0.6            8.9
     Short-term investments and other invested assets ..............................            21.7           11.0
   Maturities, prepayments and scheduled redemptions of:
     Fixed maturities held-to-maturity .............................................            60.2          472.3
     Fixed maturities available-for-sale ...........................................           636.9          289.1
     Short-term investments and other invested assets ..............................            26.5           50.2
     Mortgage loans on real estate .................................................           237.2          333.8
   Purchases of:
     Fixed maturities held-to-maturity .............................................            (6.7)        (361.1)
     Fixed maturities available-for-sale ...........................................        (6,988.8)      (1,957.8)
     Equity securities available-for-sale ..........................................          (111.0)         (47.3)
     Real estate ...................................................................            (1.1)          (9.2)
     Short-term investments and other invested assets ..............................          (118.9)        (258.5)
     Mortgage loans on real estate issued ..........................................          (335.5)        (173.2)
     Cash received related to acquisition of business ..............................              --          126.3
     Other, net ....................................................................            11.3           (5.4)
                                                                                          -------------------------

           Net cash used in investing activities ...................................        (1,547.9)        (299.8)
</TABLE>

The accompanying notes are an integral part of these unaudited consolidated
financial statements.


                                       7
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

         UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)

<TABLE>
<CAPTION>
                                                                                               Three Months Ended
                                                                                                    March 31,
                                                                                              2001            2000
                                                                                          -------------------------
                                                                                                 (in millions)
<S>                                                                                       <C>            <C>
Cash flows from financing activities:
   Issuance of common stock ........................................................              --        1,657.7
   Payments to eligible policyholders under Plan of Reorganization .................              --         (791.7)
   Acquisition of treasury stock ...................................................          (125.7)            --
   Universal life and investment-type contract deposits ............................         1,780.9        1,522.9
   Universal life and investment-type contract maturities and
     withdrawals ...................................................................        (1,605.4)      (2,290.2)
   Issuance of long-term debt ......................................................              --           10.0
   Repayment of long-term debt .....................................................              --          (18.0)
   Net increase (decrease) in commercial paper .....................................            20.3          (13.9)
                                                                                          -------------------------

           Net cash provided by financing activities ...............................            70.1           76.8
                                                                                          -------------------------

           Net increase (decrease) in cash and cash equivalents ....................        (1,047.9)          38.5

Cash and cash equivalents at beginning of period ...................................         2,974.4        1,817.9
                                                                                          -------------------------

           Cash and cash equivalents at end of period ..............................      $  1,926.5     $  1,856.4
                                                                                          =========================
</TABLE>

The accompanying notes are an integral part of these unaudited consolidated
financial statements.


                                       8
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 -- Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited consolidated financial statements of John Hancock
Financial Services, Inc. (the Company) have been prepared in accordance with
generally accepted accounting principles for interim financial information.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, these unaudited consolidated financial statements
contain all adjustments, consisting of only normal and recurring adjustments,
necessary for a fair presentation of the financial position and results of
operations. Operating results for the three-month period ended March 31, 2001
are not necessarily indicative of the results that may be expected for the year
ending December 31, 2001. These unaudited consolidated financial statements
should be read in conjunction with the Company's annual audited financial
statements as of December 31, 2000 included in the Company's Form 10-K for the
year ended December 31, 2000 filed with the United States Securities and
Exchange Commission (hereafter referred to as the Company's 2000 Form 10-K).

The balance sheet at December 31, 2000 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by accounting principles generally accepted in the United
States for complete financial statements.

Reorganization and Initial Public Offering

In connection with John Hancock Mutual Life Insurance Company's (the Mutual
Company) Plan of Reorganization (the Plan), effective February 1, 2000, the
Mutual Company converted from a mutual life insurance company to a stock life
insurance company (i.e. demutualized) and became a wholly owned subsidiary of
John Hancock Financial Services, Inc., which is a holding company. All
policyholder membership interests in the Mutual Company were extinguished on
that date and eligible policyholders of the Mutual Company received, in the
aggregate, 212.8 million shares of common stock, $1,438.7 million of cash and
$43.7 million policy credits as compensation. In addition, the Company
established a closed block, to fund the guaranteed benefits and dividends of
certain participating insurance policies. In connection with the Plan, the
Mutual Company changed its name to John Hancock Life Insurance Company.

In addition, on February 1, 2000, the Company completed its initial public
offering (IPO) in which 102.0 million shares of common stock were issued at a
price of $17.00 per share. Net proceeds from the IPO were $1,657.7 million, of
which $105.7 million was retained by the Company and $1,552.0 million was
contributed to John Hancock Life Insurance Company.

Cumulative Effect of Accounting Change

During the first quarter of 2001, the Company changed the method of accounting
for the recognition of deferred gains and losses considered in the calculation
of the annual expense for its employee pension plan under SFAS No. 87,
"Employers' Accounting for Pensions," and for its postretirment health and
welfare plans under SFAS No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions." The Company changed the method of recognizing
gains and losses from deferral within a 10% corridor and amortization of gains
outside this corridor over the future working careers of the participants to a
deferral within a 5% corridor and amortization of gains and losses outside this
corridor over the future working careers of the participants. The new method is
preferable because in the Company's situation, it produces results that more
closely match current economic realities of the Company's retirement and welfare
plans through the use of the current fair values of assets while still
mitigating the impact of extreme gains and losses. As a result, the Company
recorded a credit of $18.6 million (net of tax of $9.9 million), related to its
employee benefit pension plans, and a credit of $4.7 million (net of tax of $2.6
million), related to its postretirement health and welfare plans. The total
credit recorded as a cumulative effect of an accounting change was $23.3 million
(net of tax of $12.5 million), or $0.07 diluted earnings per share. This change
in accounting increased net income for the quarter ended March 31, 2001 by $1.1
million. The pro forma


                                       9
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 -- Summary of Significant Accounting Policies - (Continued)

Cumulative Effect of Accounting Change - (Continued)

results, assuming this change in accounting had taken place as of the beginning
of 2000, would not be materially different from the reported results.

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." In June 1999, the FASB issued SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of FASB Statement 133." This Statement amends SFAS No. 133 to
defer its effective date for one year, to fiscal years beginning after June 15,
2000. In June 2000, the FASB issued SFAS No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities - an amendment of SFAS No.
133". This Statement makes certain changes in the hedging provisions of SFAS No.
133, and is effective concurrent with SFAS No. 133. As amended, SFAS No. 133
requires all derivatives to be recognized on the balance sheet at fair value,
and establishes special accounting for the following three types of hedges: fair
value hedges, cash flow hedges, and hedges of foreign currency exposures of net
investments in foreign operations. Special accounting for qualifying hedges
provides for matching the timing of gain or loss recognition on the hedging
instrument with the recognition of the corresponding changes in value of the
hedged item. If the derivative is a hedge, depending on the nature of the hedge,
changes in the fair value of derivatives will either be offset against the
change in the fair value of the hedged assets, liabilities or firm commitments
through earnings or recognized in other comprehensive income until the hedged
item is recognized in earnings. The ineffective portion of a derivative's change
in fair value will be recognized immediately in earnings and will be included in
net realized and other investment gains. As a result, such amounts will not be
included in the determination of the Company's segment after tax operating
income. The Company believes that its current risk management philosophy will
remain largely unchanged after adoption of the Statement. In addition, SFAS No.
133, as amended, precludes the designation of held-to-maturity fixed maturity
investment securities as hedged items in hedging relationships where the hedged
risk is interest rate risk.

On January 1, 2001, the Company adopted SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", as amended. The adoption of SFAS No. 133,
as amended, resulted in a charge to operations accounted for as a cumulative
effect of accounting change of $16.1 million (net of tax of $8.3 million) as of
January 1, 2001. In addition, as of January 1, 2000, a $227.6 million (net of
tax of $122.6 million) cumulative effect of accounting change was recorded in
other comprehensive income for the transition adjustment in the adoption of SFAS
133, as amended, and the reclassification of certain securities from the
held-to-maturity category to the available-for-sale category. The transition
adjustment for the adoption of SFAS 133 resulted in an increase in other
comprehensive income of $40.5 million (net of tax of $21.8 million) that was
accounted for as the cumulative effect of accounting change. The adjustment for
the reclassification of $12.1 billion of the held-to-maturity fixed maturity
investment portfolio to the available-for-sale category resulted in an increase
in other comprehensive income of $187.1 million (net of tax of $100.8 million)
as of January 1, 2001.

New Accounting Pronouncements

In December 2000, the American Institute of Certified Public Accountants (AICPA)
issued Statement of Position (SOP) 00-3, "Accounting by Insurance Enterprises
for Demutualizations and Formations of Mutual Insurance Holding Companies and
Certain Long-Duration Participating Contracts." The SOP, which was adopted with
respect to accounting for demutualization expenses by the Company on December
15, 2000, requires that demutualization related expenses be classified as a
single line item within income from continuing operations and should not be
classified as an extraordinary item. The adoption of SOP 00-3 resulted in the
reclassification of demutualization expenses previously recorded as an
extraordinary item in the three months ended March 31, 2000 of $13.7 million
 (net of tax of $2.3 million). The remaining provisions of this SOP, which will
require the (1) inclusion of all closed block activity together with all other
assets, liabilities, revenues and expenses and (2) recognition of a policyholder
dividend obligation that represents cumulative actual closed block earnings in
excess of expected periodic amounts calculated


                                       10
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

at the date of the demutualization, are effective no later than December 31,
2001. See Note 5 for a summary description of the closed block assets,
liabilities, revenues and expenses, which do not include the policyholder
dividend obligation that will be required in 2001. The Company currently is
evaluating the effect that establishing the policyholder dividend obligation
will have on its results of operations and financial position. That impact is
not known at this time.


                                       11
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 -- Summary of Significant Accounting Policies - (Continued)

Codification

In March 1998, the National Association of Insurance Commissioners (NAIC)
adopted codified statutory accounting principles (Codification) effective
January 1, 2001. Codification changes prescribe statutory accounting practices
and results in changes to the accounting practices that the Company's domestic
life insurance subsidiaries use to prepare their statutory-basis financial
statements. The states of domicile of the Company's domestic life insurance
subsidiaries adopted Codification as the prescribed basis of accounting on which
domestic insurers must report their statutory-basis results effective January 1,
2001. The cumulative effect of changes in accounting principles adopted to
conform to the requirements of Codification is reported as an adjustment to
surplus in the statutory-basis financial statements as of January 1, 2001.
Although the implementation of Codification had a negative impact on the
Company's domestic life insurance subsidiaries' statutory-basis capital and
surplus, the Companies remains in compliance with all regulatory and contractual
obligations.

Recent Acquisitions

On March 1, 2000, the Company acquired the individual long term care insurance
business of Fortis, Inc. (Fortis). The pro forma results for the period ended
March 31, 2000, assuming the acquisition of Fortis had taken place as of the
beginning of 2000, would not be materially different from the reported results.


                                       12
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 2 -- Segment Information

The Company operates in the following five business segments: two segments
primarily serve retail customers, two segments serve institutional customers and
our fifth segment is the Corporate and Other Segment, which includes our
international operations. Our retail segments are the Protection Segment and the
Asset Gathering Segment. Our institutional segments are the Guaranteed and
Structured Financial Products Segment (G&SFP) and the Investment Management
Segment. For additional information about the Company's business segments,
please refer to the Company's 2000 Form 10-K.

The following table summarizes selected financial information by segment for the
three months ended or as of March 31 and reconciles segment revenues and segment
after-tax operating income to amounts reported in the unaudited consolidated
statements of income (in millions). Included in the Protection Segment for 2001
and 2000 are the closed block assets and liabilities, as well as the
contribution from the closed block, which is reflected in "Revenues" in the
table below (see Note 5).

<TABLE>
<CAPTION>
                                                                    Retail                   Institutional
                                                       Retail       Asset     Institutional   Investment   Corporate
                                                     Protection   Gathering       G&SFP       Management   and Other   Consolidated
                                                     ----------   ---------       -----       ----------   ---------   ------------
<S>                                                  <C>         <C>           <C>           <C>          <C>            <C>
As of or for the three months ended
March 31, 2001
Revenues:
   Segment revenues ..............................   $   449.5   $   288.9     $   859.3     $    35.6    $   365.1      $ 1,998.4
   Realized investment and other gains
       (losses), net .............................        (9.1)        6.9         (14.4)           --         (9.8)         (26.4)
                                                     -----------------------------------------------------------------------------
   Revenues ......................................       440.4       295.8         844.9          35.6        355.3        1,972.0
                                                     =============================================================================
   Net investment income .........................       145.5       119.8         467.1           5.5         43.5          781.4
Net Income:
   Segment after-tax operating income ............        72.6        31.5          59.0           5.4         22.0          190.5
   Realized investment gains (losses), net .......        (5.5)        4.6          (8.2)         (0.1)        (5.6)         (14.8)
   Restructuring charges .........................        (1.2)      (13.2)         (0.1)         (0.4)        (0.1)         (15.0)
   Cumulative effect of accounting
      change .....................................        11.7        (0.5)         (1.2)         (0.2)        (2.6)           7.2
                                                     -----------------------------------------------------------------------------
   Net income ....................................   $    77.6   $    22.4     $    49.5     $     4.7    $    13.7      $   167.9
                                                     =============================================================================
Supplemental Information:
   Inter-segment revenues ........................          --          --            --     $     8.1    $    (8.1)            --
   Equity in net income of investees
    accounted for by the equity method ...........   $     2.3   $     1.1     $     3.4            --         12.6      $    19.4
   Amortization of deferred policy
    acquisition costs, excluding amounts
    related to realized investment gains .........        28.8        23.4           0.6            --         26.9           79.7
   Segment assets ................................    26,576.4    13,634.4      30,986.9       2,700.9     12,149.7       86,048.3
</TABLE>


                                       13
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 2 -- Segment Information - (Continued)

<TABLE>
<CAPTION>
                                                               Retail                   Institutional
                                                  Retail       Asset     Institutional   Investment   Corporate
                                                Protection   Gathering       G&SFP       Management   and Other   Consolidated
                                                ----------   ---------       -----       ----------   ---------   ------------
<S>                                             <C>         <C>           <C>           <C>          <C>            <C>
As of or for the three months ended
March 31, 2000
Revenues:
   Segment revenues ......................      $   516.3   $   297.4     $   486.2     $    79.2    $   465.6      $ 1,844.7
   Realized investment and other gains
     (losses), net .......................            7.8         1.9          (7.4)           --         17.3           19.6
                                                -----------------------------------------------------------------------------
   Revenues ..............................      $   524.1   $   299.3     $   478.8     $    79.2    $   482.9      $ 1,864.3
                                                =============================================================================
   Net investment income .................      $   175.0   $   102.6     $   424.6     $     5.6    $   140.8      $   848.6
Net Income:
   Segment after-tax operating income ....      $    72.6   $    36.3     $    55.2     $    21.4    $    19.9      $   205.4
   Realized investment gains (losses), net            4.8         1.2          (4.7)           --          9.9           11.2
   Restructuring charges .................           (3.0)       (0.9)         (2.1)           --         (0.9)          (6.9)
   Demutualization expenses ..............           (2.6)       (0.6)         (0.6)           --         (9.9)         (13.7)
   Other demutualization related costs ...           (6.7)       (1.4)         (1.6)           --         (0.5)         (10.2)
   Group pension dividend transfer .......             --          --           5.7            --           --            5.7
                                                -----------------------------------------------------------------------------
   Net income ............................      $    65.1   $    34.6     $    51.9     $    21.4    $    18.5      $   191.5
                                                =============================================================================
Supplemental Information:
   Inter-segment revenues ................      $      --   $      --     $      --     $    11.1    $   (11.1)     $      --
   Equity in net income of investees
     accounted for by the equity method ..             --        (0.4)          0.1                       12.8           12.5
   Amortization of deferred policy
     acquisition costs, excluding amounts
     related to realized investment gains            13.5        15.1           0.7            --         14.8           44.1
   Segment assets ........................      $26,407.4   $14,337.6     $29,932.4     $ 2,253.9    $12,077.5      $85,008.8
</TABLE>

Note 3 -- Severance

The Company has initiated a restructuring plan to reduce costs and increase
future operating efficiency by consolidating portions of its operations. The
plan consists primarily of reducing staff in the home office and terminating
certain operations outside the home office.

In connection with the restructuring plan, approximately 642 employees have been
or will be terminated. These employees are or have been associated with
operations in our Boston office and outside the home office. As of March 31,
2001, the liability for employee termination costs, included in other
liabilities was $33.3 million. Employee termination costs, included in other
operating costs and expenses, were $23.6 million and $10.8 million for the three
months ended March 31, 2001 and 2000, respectively. Of the total number of
employees affected, approximately 472 employees were terminated as of March 31,
2001, having received benefit payments of approximately $36.8 million.

Note 4 -- Contingencies

In the normal course of its business operations, the Company is involved with
litigation from time to time with claimants, beneficiaries and others, and a
number of litigation matters were pending as of March 31, 2001. It is the
opinion of management, after consultation with counsel, that the ultimate
liability with respect to these claims, if any, will not materially affect the
financial position or results of operations of the Company.


                                       14
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 4 -- Contingencies - (Continued)

During 1997, the Company entered into a court-approved settlement relating to a
class action lawsuit involving certain individual life insurance policies sold
from 1979 through 1996. In entering into the settlement, the Company
specifically denied any wrongdoing. The reserve held in connection with the
settlement to provide for relief to class members and for legal and
administrative costs associated with the settlement amounted to $120.1 million
and $172.8 million at March 31, 2001 and December 31, 2000, respectively. There
were no additional reserves recorded related to the settlement for the three
months ended March 31, 2001 and 2000. The estimated reserve is based on a number
of factors, including the estimated cost per claim and the estimated costs to
administer the claims.

During 1996, management determined that it was probable that a settlement would
occur and that a minimum loss amount could be reasonably estimated. Accordingly,
the Company recorded its best estimate based on the information available at the
time. The terms of the settlement agreement were negotiated throughout 1997 and
approved by the court on December 31, 1997. In accordance with the terms of the
settlement agreement, the Company contacted class members during 1998 to
determine the actual type of relief to be sought by class members. The majority
of the responses from class members were received by the fourth quarter of 1998.
The type of relief sought by class members differed from the Company's previous
estimates, primarily due to additional outreach activities by regulatory
authorities during 1998 encouraging class members to consider alternative
dispute resolution relief. In 1999, the Company updated its estimate of the cost
of claims subject to alternative dispute resolution relief and revised its
reserve estimate accordingly.

Given the uncertainties associated with estimating the reserve, it is reasonably
possible that the final cost of the settlement could differ materially from the
amounts presently provided for by the Company. The Company will continue to
update its estimate of the final cost of the settlement as the claims are
processed and more specific information is developed, particularly as the actual
cost of the claims subject to alternative dispute resolution becomes available.
However, based on information available at the time, and the uncertainties
associated with the final claim processing and alternative dispute resolution,
the range of any additional cost related to the settlement cannot be estimated
with precision.

On February 28, 1997, the Company sold a major portion of its group insurance
business to UNICARE Life & Health Insurance Company (UNICARE), a wholly owned
subsidiary of WellPoint Health Networks, Inc. The business sold included the
Company's group accident and health business and related group life business and
Cost Care, Inc., Hancock Association Services Group and Tri-State, Inc., all of
which were indirect wholly owned subsidiaries of the Company. The Company
retained its group long-term care operations. The insurance business sold was
transferred to UNICARE through a 100% coinsurance agreement. The Company has
secured a $397.0 million letter of credit facility with a group of banks. The
banks have agreed to issue a letter of credit to the Company pursuant to which
the Company may draw up to $397.0 million for any claims not satisfied by
UNICARE under the coinsurance agreement after the Company has incurred the first
$113.0 million of losses from such claims. The amount available pursuant to the
letter of credit agreement and any letter of credit issued thereunder
automatically will be reduced on a scheduled basis consistent with the
anticipated run-off of liabilities related to the business reinsured under the
coinsurance agreement. The letter of credit facility was reduced to $272.0
million effective March 1, 2000 and is scheduled to be reduced again to $127.0
million on March 1, 2001. The letter of credit and any letter of credit issued
thereunder are scheduled to expire on March 1, 2002. The Company remains liable
to its policyholders to the extent that UNICARE does not meet its contractual
obligations under the coinsurance agreement.


                                       15
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 4 -- Contingencies - (Continued)

Through the Company's group health insurance operations, the Company entered
into a number of reinsurance arrangements in respect of personal accident
insurance and the occupational accident component of workers compensation
insurance, a portion of which was originated through a pool managed by Unicover
Managers, Inc. Under these arrangements, the Company both assumed risks as a
reinsurer, and also passed 95% of these risks on to other companies. This
business had originally been reinsured by a number of different companies, and
has become the subject of widespread disputes. The disputes concern the
placement of the business with reinsurers and recovery of the reinsurance. The
Company is engaged in disputes, including a number of legal proceedings, in
respect of this business. The risk to the Company is that other companies that
reinsured the business from the Company may seek to avoid their reinsurance
obligations. However, the Company believes that it has a reasonable legal
position in this matter. During the fourth quarter of 1999 and early 2000, the
Company received additional information about its exposure to losses under the
various reinsurance programs. As a result of this additional information and in
connection with global settlement discussions initiated in late 1999 with other
parties involved in the reinsurance programs, during the fourth quarter of 1999
the Company recognized a charge for uncollectible reinsurance of $133.7 million,
after tax, as its best estimate of its remaining loss exposure. The Company
believes that any exposure to loss from this issue, in addition to amounts
already provided for as of March 31, 2001, would not be material.

Reinsurance ceded contracts do not relieve the Company from its obligations to
policyholders. The Company remains liable to its policyholders for the portion
reinsured to the extent that any reinsurer does not meet its obligations for
reinsurance ceded to it under the reinsurance agreements. Failure of the
reinsurers to honor their obligations could result in losses to the Company;
consequently, estimates are established for amounts deemed or estimated to be
uncollectible. To minimize its exposure to significant losses from reinsurance
insolvencies, the Company evaluates the financial condition of its reinsurers
and monitors concentration of credit risk arising from similar characteristics
of the reinsurers.


                                       16
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 5 -- Closed Block

Under the Plan, the Company created a closed block for the benefit of policies
included therein. The following table sets forth certain summarized financial
information relating to the closed block as of the dates indicated:

<TABLE>
<CAPTION>
                                                                  March 31,    December 31,
                                                                    2001          2000
                                                                 ---------     -----------
                                                                      (in millions)
<S>                                                              <C>            <C>
Assets
Investments
Fixed maturities:
   Held-to-maturity--at amortized cost
      (fair value: March 31--$117.7; December 31--$2,327.4)      $   120.4      $ 2,269.9
   Available-for-sale--at fair value
      (cost: March 31--$4,710.2; December 31--$2,378.7) ...        4,824.6        2,353.0
Equity securities:
   Available-for-sale--at fair value
      (cost: March 31--$9.1; December 31--$5.3) ...........            9.5            6.3
Mortgage loans on real estate .............................        1,956.7        1,930.6
Policy loans ..............................................        1,540.0        1,540.6
Short-term investments ....................................           19.3           62.1
Other invested assets .....................................           39.8           40.7
                                                                 ---------      ---------
   Total Investments ......................................        8,510.3        8,203.2

Cash and cash equivalents .................................          297.4          305.6
Accrued investment income .................................          165.8          149.3
Premiums and accounts receivable ..........................           19.5           27.1
Deferred policy acquisition costs .........................          907.3          947.3
Other assets ..............................................           84.6           77.5
                                                                 ---------      ---------
   Total Closed Block Assets ..............................      $ 9,984.9      $ 9,710.0
                                                                 =========      =========

Liabilities
Future policy benefits ....................................      $ 9,983.5      $ 9,910.5
Policyholders' funds ......................................        1,467.9        1,459.5
Other liabilities .........................................          729.3          665.9
                                                                 ---------      ---------
   Total Closed Block Liabilities .........................      $12,180.7      $12,035.9
                                                                 =========      =========
</TABLE>


                                       17
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 5 -- Closed Block - (Continued)

The following table sets forth certain summarized financial information relating
to the closed block for the period indicated:

<TABLE>
<CAPTION>
                                                                                For the Period
                                                   Three Months Ended             February 1
                                                        March 31,              Through March 31,
                                                          2001                       2000
                                                   ---------------------------------------------
                                                                    (in millions)
<S>                                                      <C>                        <C>
Revenues
  Premiums ........................................      $233.6                     $171.9
  Net investment income ...........................       169.0                      108.9
  Net realized investment and other gains, net ....         2.7                        3.1
  Other closed block revenue (expense) ............         0.3                       (0.3)
                                                      -------------------------------------
     Total closed block revenues ..................       405.6                      283.6

Benefits and Expenses

  Benefits to policyholders .......................       253.6                      173.0
  Other operating costs and expenses ..............        (2.3)                      (3.1)
  Amortization of deferred policy acquisition costs        24.2                        8.5
  Dividends to policyholders ......................       109.8                       76.5
                                                      -------------------------------------
     Total closed block benefits and expenses .....       385.3                      254.9
                                                      -------------------------------------
     Contribution from the closed block ...........      $ 20.3                    $ 28.7
                                                      =====================================
</TABLE>


                                       18
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 6 - Derivatives and Hedging Instruments

The Company uses various derivative instruments to hedge and manage its exposure
to changes in interest rate levels, foreign exchange rates, and equity market
prices, and to manage the duration mismatch of assets and liabilities.

The fair value of derivative instruments classified as assets at March 31, 2001
was $30.4 million, and appears on the consolidated balance sheet in other
assets. The fair value of derivative instruments classified as liabilities at
March 31, 2001 was $268.0 million, and appears on the consolidated balance sheet
in other liabilities.

In certain of these cases, the Company uses hedge accounting as allowed by SFAS
133, as amended, by designating derivative instruments as either fair value or
cash flow hedges. For derivative instruments that are designated and qualify as
fair value hedges, the change in fair value of the derivative instrument as well
as the offsetting change in fair value of the hedged item are recorded in net
realized investment and other gains/losses. The change in value of the hedged
item is used to adjust its cost basis and is amortized into investment income
over its remaining life, beginning either immediately or when the hedge
designation is removed. For derivative instruments that are designated and
qualify as cash flow hedges, the effective portion of the change in fair value
of the derivative instrument is recorded in other comprehensive income, and then
reclassified into income when the hedged item affects income. Hedge
effectiveness is assessed quarterly by a variety of techniques including
regression analysis and cumulative dollar offset. In certain cases zero hedge
ineffectiveness is assumed because the derivative instrument was constructed
such that all the terms of the derivative exactly match the hedged risk in
hedged item. The ineffective portion is recorded in net realized investment and
other gains and losses.

For derivative instruments not designated as hedges, the change in fair value of
the derivative is recorded in net realized investment and other gains and
losses.

In cases where the Company receives or pays a premium as consideration for
entering into a derivative instrument (i.e., interest rate caps and floors,
swaptions, and equity collars), the premium is amortized into investment income
over the useful life of the derivative instrument. The fair value of such
premiums (i.e., the inherent ineffectiveness of the derivative) is excluded from
the assessment of hedge effectiveness and is included in net realized investment
and other gains and losses.


                                       19
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 6 - Derivatives and Hedging Instruments - (Continued)

Fair Value Hedges

The Company uses interest rate futures contracts and interest rate swap
agreements as part of its overall strategies of managing the duration mismatch
of assets and liabilities or the average life of certain asset portfolios to
specified targets. Interest rate swap agreements are contracts with a
counterparty to exchange interest rate payments of a differing character (e.g.,
fixed-rate payments exchanged for variable-rate payments) based on an underlying
principal balance (notional principal). The net differential to be paid or
received on interest rate swap agreements and currency rate swap agreements is
accrued and recognized as a component of net investment income.

The Company also manages interest rate exposure by using interest rate swap
agreements to modify certain liabilities, such as fixed rate debt and Constant
Maturity Treasuries (CMT) indexed liabilities, by converting them to a floating
rate.

The Company enters into interest rate cap agreements, cancelable interest rates
swap agreements, and written swaptions to manage the interest rate exposure of
options that are embedded in certain assets and liabilities. A written swaption
obligates the Company to enter into an interest rate agreement on the expiration
date, contingent on future interest rates. Interest rate cap and floor
agreements are contracts with a counterparty which require the payment of a
premium for the right to receive payments for the difference between the cap or
floor interest rate and a market interest rate on specified future dates based
on an underlying principal balance (notional principal). Amounts earned on
interest rate cap and floor agreements and swaptions are recorded as an
adjustment to net investment income.

The Company uses equity collar agreements to reduce its equity market exposure
with respect to certain common stock investments that the Company holds. A
collar consists of a written call option that limits the Company's potential for
gain from appreciation in the stock price as well as a purchased put option that
limits the Company's potential for loss from a decline in the stock price.

Currency rate swap agreements are used to manage the Company's exposure to
foreign exchange rate fluctuations. Currency rate swap agreements are contracts
to exchange the currencies of two different countries at the same rate of
exchange at specified future dates.

For the three months ended March 31, 2001, the Company recognized a net loss of
$7.5 million related to the ineffective portion of its fair value hedges, and a
net gain of $2.1 million related to the portion of the hedging instruments that
were excluded from the assessment of hedge effectiveness. For the three months
ended March 31, 2001, none of the Company's hedged firm commitments no longer
qualified as fair value hedges.

Cash Flow Hedges

The Company uses forward starting interest rate swap agreements to hedge the
variable cash flows associated with future asset acquisitions, which will
support the Company's long term care businesses. These agreements will reduce
the impact of future interest rate changes on the cost of acquiring adequate
assets to support the investment income assumptions used in pricing these
products.

The Company uses interest rate futures contracts to hedge the variable cash
flows associated with variable benefit payments that it will make on certain
annuity contracts.

The Company used interest rate floor agreements to hedge the interest rate risk
associated with minimum interest rate guarantees in certain of its life
insurance and annuity businesses.

For the three months ended March 31, 2001, the Company recognized a net loss of
$0.1 million related to the ineffective portion of its cash flow hedges, and a
net gain of $8.0 million related to the portion of the hedging instruments that
was excluded from the assessment of hedge effectiveness. For the three months
ended March 31, 2001, none of the Company's hedged forecast transactions no
longer qualified as cash flow hedges.


                                       20
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 6 - Derivatives and Hedging Instruments - (Continued)

For the three months ended March 31, 2001, no amounts were reclassified from
other accumulated comprehensive income to earnings and it is anticipated that
approximately $1.4 million will be reclassified from other accumulated
comprehensive income to earnings within the next twelve months. The maximum
length for which variable cash flows are hedged is 24 years.

For the three months ended March 31, 2001, none of the Company's cash flow
hedges have been discontinued because it was probable that the original
forecasted transaction would not occur by the end of the originally specified
time period documented at inception of the hedging relationship.

The transition adjustment for the adoption of the statement resulted in an
increase in other comprehensive income of $23.0 million (net of tax of $12.3
million) representing the accumulation in other comprehensive income of the
effective portion of the Company's cash flow hedges as of January 1, 2001. As of
March 31, 2001, $2.7 million of losses representing the effective portion of the
change in fair value of derivative instruments designated as cash flow hedges
was added to accumulated other comprehensive income, resulting in a balance of
$20.3 million (net of tax of $12.3 million) as of March 31, 2001.

Derivatives Not Designated as Hedging Instruments

The Company enters into interest rate swap agreements, cancelable interest rate
swap agreements, interest rate futures contracts, and interest rate cap and
floor agreements to manage exposure to interest rates as described above under
Fair Value Hedging without designating the derivatives as hedging instruments.


The Company enters into equity indexed futures contracts and equity indexed
option contracts and equity swaps to generate investment return to be credited
to equity indexed universal life insurance policies. The gains and losses on
these derivatives are included in net investment income, and are offset by
crediting similar amounts to policyholders accounts.

Note 7 - Related Party Transactions

Certain directors of the Company are members or directors of other entities that
periodically perform services for or have other transactions with the Company.
Such transactions are either subject to bidding procedures or are otherwise
entered into on terms comparable to those that would be available to unrelated
third parties and are not material to the Company's results of operations or
financial condition.


                                       21
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

ITEM 2. MANAGEMENT'S DISCUSSION and ANALYSIS of FINANCIAL CONDITION and
RESULTS of OPERATIONS

      Management's Discussion and Analysis of Financial Condition and Results of
Operations (MD&A) addresses the financial condition of John Hancock Financial
Services, Inc. (John Hancock or the Company) as of March 31, 2001, compared with
December 31, 2000, and its consolidated results of operations for the
three-month periods ended March 31, 2001 and March 31, 2000, and, where
appropriate, factors that may affect future financial performance. The
discussion of the Company's consolidated financial results of operations
includes the results of the closed block for the three months ended March 31,
2001 and the period February 1, 2000 (the date the closed block became
effective) through March 31, 2000 combined on a line by line basis with the
results of operations outside the closed block for such period, as further
discussed below. This discussion should be read in conjunction with the
Company's MD&A and annual audited financial statements as of December 31, 2000
included in the Company's Form 10-K for the year ended December 31, 2000 filed
with the Securities and Exchange Commission (hereafter referred to as the
Company's 2000 Form 10-K) and unaudited consolidated financial statements and
related notes included elsewhere in this Form 10-Q.

      Statements, analyses, and other information contained in this report
relating to trends in the Company's operations and financial results, the
markets for the Company's products, the future development of the Company's
business, and the contingencies and uncertainties to which the Company may be
subject, as well as other statements including words such as "anticipate,"
"believe," "plan," "estimate," "intend," "will," "should," "may," and other
similar expressions, are "forward-looking statements" under the Private
Securities Litigation Reform Act of 1995. Such statements are made based upon
management's current expectations and beliefs concerning future events and their
effects on the Company, which may not be those anticipated by management. The
Company's actual results may differ materially from the results anticipated in
these forward-looking statements. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Important Factors that May Affect
Future Results" included herein for a discussion of factors that could cause or
contribute to such material differences.

The Reorganization and Initial Public Offering

      The Board of Directors of John Hancock Mutual Life Insurance Company (the
Mutual Company) unanimously adopted the Plan of Reorganization (the Plan) on
August 31, 1999. Under the terms of the Plan, effective February 1, 2000, the
Mutual Company converted from a mutual life insurance company to a stock life
insurance company (i.e. demutualized) and became a wholly-owned subsidiary of
John Hancock Financial Services, Inc., which is a holding company. All
policyholder membership interests in the Mutual Company were extinguished on
that date and eligible policyholders of the Mutual Company received, in
aggregate, 212.8 million shares of common stock, $1,438.7 million of cash and
$43.7 million of policy credits as compensation. In connection with the
reorganization, the Mutual Company changed its name to John Hancock Life
Insurance Company (the Life Company).

      In addition, on February 1, 2000, the Company completed its initial public
offering (IPO) in which 102.0 million shares of common stock were issued at a
price of $17.00 per share. Net proceeds from the IPO were $1,657.7 million, of
which $105.7 million was retained by the Company and $1,552.0 million was
contributed to the Life Company.

      Under the Plan, as of February 1, 2000, the Life Company created a closed
block for the benefit of policies included therein. The purpose of the closed
block is to protect the policy dividend expectations of the policies included in
the closed block after demutualization. Unless the Commissioner of Insurance of
the Commonwealth of Massachusetts and, in certain circumstances the New York
Superintendent of Insurance, consent to an earlier termination, the closed block
will continue in effect until the date none of such policies is in-force. As of
February 1, 2000, the Company segregated closed block assets of $9,343.0
million, an amount that is expected to produce cash flows which, together with
anticipated revenues from policies included in the closed block, is expected to
be sufficient to provide for payment of policy benefits, taxes and direct asset
acquisition and disposal costs, and for continuation of policy dividend scales
payable in 1999, so long as the experience underlying such dividend scales
continues. The assets allocated to the


                                       22
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

closed block and any cash flows provided by these assets will solely benefit the
holders of policies included in the closed block. As of February 1, 2000, when
the closed block was established, total closed block liabilities were $12,118.3
million.

      If the assets allocated to the closed block, the cash flows therefrom and
the revenues from the closed block business prove to be insufficient to pay the
benefits guaranteed under the policies included in the closed block, the Life
Company will be required to make payments from its general funds in an amount
equal to the shortfall. We funded the closed block to provide for payment of
guaranteed benefits on such policies and for continuation of dividends paid
under 1999 policy dividends scales, assuming the experience underlying such
dividend scales continues. Therefore, we do not believe it will be necessary to
use general funds to pay guaranteed benefits on closed block business unless the
closed block business experiences substantial adverse deviations in investment,
mortality, persistency or other experience factors.

      For additional information on the closed block see Note 5 to the unaudited
consolidated financial statements and the Company's 2000 Form 10-K.

      The costs relating to the demutualization, excluding costs relating to the
offering, were approximately $129.1 million, net of income taxes, of which $17.0
million was recognized in the three months ending March 31, 2000. No
demutualization costs were incurred in 2001. Demutualization expenses include
printing and mailing costs and our aggregate cost of engaging independent
accounting, actuarial, financial, investment banking, legal and other
consultants to advise us. In addition, our costs include the costs of the staff
and advisors of the Massachusetts Division of Insurance and the New York
Insurance Department as to the demutualization process and related matters.

Results of Operations

      The table below presents the consolidated results of operations for the
three months ended March 31, 2001 and 2000, respectively. For comparability with
prior periods, the table below includes the results of operations of the closed
block for the period February 1, 2001 through March 31, 2001 combined on a line
by line basis with the results of operations outside the closed block.

                                                          Three months ended
                                                               March 31,
                                                      -------------------------
                                                        2001               2000
                                                        ----               ----
                                                            (in millions)
Revenues (1)                                          $2,357.3         $2,119.2

Benefits and expenses (1)                              2,126.0          1,824.8
                                                      -------------------------
Income before income taxes and
    cumulative effect of accounting
    changes                                              231.3            294.4

Income taxes                                              70.6            102.9

Cumulative effect of accounting changes                    7.2              --
                                                      -------------------------

Net income                                              $167.9           $191.5
                                                      =========================

(1)   Revenues and benefits and expenses above differ from the unaudited
      statements of net income due to closed block expenses for the three months
      ended March 31, 2001 and the period February 1, 2000 through March 31,
      2000 of $420.0 million and $254.9 million, respectively. These expenses
      are included in revenues through the contribution from the closed block on
      the unaudited consolidated statement of income for the three months ended
      March 31, 2001 and the period February 1, 2000 through March 31, 2000.


                                       23
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Three Months Ended March 31, 2001 Compared to Three Months Ended March 31, 2000

      Consolidated income before income taxes and cumulative effect of
accounting changes of $231.3 million for the three months ended March 31, 2001
decreased by $63.1 million, or 21.4%, from that reported in the comparable prior
year period. The decrease is primarily attributable to a decrease of $27.9
million in income before income taxes and cumulative effect of accounting
changes in the Investment Management Segment due to one-time fees in the timber
investment management unit and a performance fee earned by the mezzanine fund
manager in the first quarter of 2000, and a decrease of $19.1 million in the
Asset Gathering Segment due to additions to reserves of $13.1 million from
increased sales of single premium immediate annuities, increased amortization of
deferred policy acquisition costs in 2001 due to the implementation of new
modeling systems and lower product fees in the variable annuity business in 2001
due to depreciation of the equity markets during the period. In addition, income
before income taxes and cumulative effect of accounting changes in the Corporate
and Other Segment decreased $16.5 million. The Company's indirect majority-owned
Canadian life insurance subsidiary (Maritime) increased $17.7 million, primarily
due to favorable experience in Maritime's individual life insurance business and
group insurance business, was offset by a decrease in investment income in the
Corporate and Other Segment due to nonrecurring interest income on IPO proceeds
of $13.4 million and $19.6 million of lower realized gains from venture capital
partnerships. Income before income taxes and cumulative effect of accounting
changes in the Guaranteed and Structured Financial Products Segment (G&SFP)
decreased $4.9 million, primarily due to an increase in realized losses of $7.0
million, or 93.6%. These decreases in consolidated income before income taxes
and cumulative effect of accounting changes were partially offset by an increase
of $5.3 million in the Protection Segment driven by improved performance in the
nontraditional life insurance business and retail long term care insurance
business. The Company generated $23.7 million in net realized investment and
other losses in the three months ended March 31, 2001, compared to $21.4 million
in net realized investment and other gains for the three months ended March 31,
2000. Net realized investment and other gains generated in 2000 were the result
of the initiative to divest the Company of real estate investments, while losses
generated in 2001 were primarily the result of deteriorating market conditions.

      Revenues of $2,357.3 million for the three months ended March 31, 2001
increased $238.1 million, or 11.2%, compared to the three months ended March 31,
2000, primarily due to revenue growth of $366.1 million in the G&SFP Segment, an
increase of 76.5%. The increase in G&SFP revenues is primarily due to the
premium growth in the single premium annuity business, which improved $343.0
million on two large sales in the period. Revenues increased $46.8 million, or
6.0%, in the Protection Segment, primarily due to an increase in premiums in the
retail long term care insurance business. These increases in revenues were
partially offset by a decrease in the Corporate and Other Segment, which
decreased $127.6 million, or 26.4%. Net investment income decreased $97.3
million driven by the mark-to-market adjustments on equity securities backing
universal life products issued by Maritime Life, and the nonrecurring $13.4
million of investment income on IPO proceeds. Maritime's mark-to-market
adjustments are largely offset by changes to policyholder benefits and deferred
acquisition costs. In addition, realized gains from venture capital partnerships
decreased by $19.6 million. The Investment Management Segment decreased $43.7
million, or 55.1%, primarily due to nonrecurring advisory fee income. The first
quarter of 2000 included the receipt of a $35.5 million of one-time fees in the
timber investment management unit and $4.8 million in the mezzanine fund. Asset
Gathering Segment revenues decreased $3.5 million, or 1.2%, primarily due to a
decrease in management advisory fees and commission income from the mutual funds
and variable annuity business of $30.3 million and $2.8 million, respectively,
driven by depreciation in the equity markets during the period. These decreases
were partially offset by an increase in net investment income of $17.2 million
driven by the fixed annuity business and $13.5 million in increased premiums
primarily due to the single premium immediate annuity business.

      Benefits and expenses of $2,126.0 million for the three months ended March
31, 2001 increased $301.2 million, or 16.5%, compared to the three months ended
March 31, 2000. The increase is driven by G&SFP increasing $371.0 million, or
92.8%. G&SFP's increase is primarily due to an increase in reserves reflecting
strong sales of annuities in the first quarter of 2001. Benefits and expenses in
the Protection Segment


                                       24
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

increased $41.5 million, or 6.1%, primarily due to increases in benefits to
policyholders driven by the growth in the retail long term care insurance
business and amortization of deferred policy acquisition costs due to the
implementation of new modeling systems. The Asset Gathering Segment's increase
in benefits and expenses of $15.7 million, or 6.3%, is primarily due to
increased benefits to policyholders and amortization of deferred acquisition
expenses due to the implementation of new modeling systems, partially offset by
lower commission expense in the mutual fund business driven by lower front end
load charge mutual fund sales and lower redemptions of deferred sales charge
mutual fund shares and operating expenses. Partially offsetting the $301.2
million increase to benefits and expenses was a $111.1 million decrease in
Corporate and Other's benefits and expenses. Corporate and Other's decrease in
benefits and expenses was driven by a $103.1 million decrease in benefits to
policyholders, primarily the result of reduced policyholder credits due to the
negative mark-to-market adjustments on equity securities supporting Maritime's
universal life policies and favorable experience on the individual life
insurance and group insurance lines of business. The $15.7 million decrease in
Investment Management's benefits and expenses was driven by lower operating
expenses due to the 2000 restructuring of a portfolio in the timber investment
management business.

Results of Operations by Segment

      We operate our business in five segments. Two segments primarily serve
retail customers, two segments serve institutional customers and our fifth
segment is the Corporate and Other Segment, which includes our international
operations. Our retail segments are the Protection Segment and the Asset
Gathering Segment. Our institutional segments are the Guaranteed and Structured
Financial Products Segment and the Investment Management Segment.

      We evaluate segment performance and base management's incentives on
segment after-tax operating income, which excludes the effect of net realized
investment gains and losses and other unusual or non-recurring events and
transactions. Segment after-tax operating income is determined by adjusting GAAP
net income for net realized investment and other gains and losses, cumulative
effect of accounting changes, and certain other items which we believe are not
indicative of overall operating trends. While these items may be significant
components in understanding and assessing our consolidated financial
performance, we believe that the presentation of segment after-tax operating
income enhances the understanding of our results of operations by highlighting
net income attributable to the normal, recurring operations of the business.
However, segment after-tax operating income is not a substitute for net income
determined in accordance with GAAP.

      A discussion of the adjustments to GAAP reported income, many of which
affect each operating segment, follows the table below. A reconciliation of
segment after-tax operating income, as adjusted, to GAAP reported net income
precedes each segment discussion.


                                       25
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

                                                          Three months ended
                                                               March 31,
                                                          2001          2000
                                                         ------       ------
Segment Data: (1)                                            (in millions)
Segment after-tax operating income:
  Protection Segment ..............................      $ 72.6       $ 72.6
  Asset Gathering Segment .........................        31.5         36.3
                                                         ------       ------
      Total Retail ................................       104.1        108.9
  Guaranteed and Structured Financial Products
      Segment .....................................        59.0         55.2
  Investment Management Segment ...................         5.4         21.4
                                                         ------       ------
      Total Institutional .........................        64.4         76.6
  Corporate and Other Segment .....................        22.0         19.9
                                                         ------       ------
  Total segment after-tax operating income ........       190.5        205.4

After-tax adjustments: (1)
  Realized investment and other gains (losses), net       (14.8)        11.2
  Restructuring charges ...........................       (15.0)        (6.9)
  Corporate account asset transfer ................          --          5.7
  Demutualization expenses ........................          --        (13.7)
  Other demutualization related costs .............          --        (10.2)
                                                         ------       ------
Total after-tax adjustments .......................       (29.8)       (13.9)
                                                         ------       ------
GAAP Reported:
  Income before cumulative effect
    of accounting changes .........................       160.7        191.5
  Cumulative effect of accounting changes .........         7.2           --
                                                         ------       ------
  Net income ......................................      $167.9       $191.5
                                                         ======       ======

(1) See "Adjustments to GAAP Reported Net Income" set forth below.

Adjustments to GAAP Reported Net Income

      Our GAAP reported net income was significantly affected by net realized
investment and other gains and losses and unusual or non-recurring events and
transactions presented in the reconciliation of GAAP reported net income to
segment after-tax operating income in Note 2 - Segment Information in the notes
to the unaudited consolidated financial statements. A description of these
adjustments follows.

      In both periods, net realized investment and other gains and losses,
except for gains and losses from mortgage securitizations and mezzanine funds
have been excluded from segment after-tax operating income due to their
volatility between periods and because such data are often excluded by analysts
and investors when evaluating the overall financial performance of insurers. The
volatility between periods can be impacted by fluctuations in the market, as
well as by changes in the volume of activity, which can be influenced by us and
our investment decisions. Realized investment gains and losses from mortgage
securitizations and mezzanine funds were not excluded from segment after-tax
operating income because we view the related gains and losses as in integral
part of the core business of those operations.

      Net realized investment and other gains have been reduced by: (1)
amortization of deferred policy acquisition costs to the extent that such
amortization results from realized gains and losses and (2) the portion of
realized gains and losses credited to participating pension contract holder
accounts. We believe presenting realized investment and other gains and losses
in this format provides information useful in evaluating our operating
performance. This presentation may not be comparable to presentations made by
other insurers. Summarized below is a reconciliation of (a) net realized
investment and other gains per the unaudited consolidated financial statements
and (b) the adjustment made for net realized investment and other gains to
calculate segment after-tax operating income for the three months ended March
31, 2001 and 2000.


                                       26
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

                                                             Three months ended
                                                                 March 31,
                                                               2001       2000
                                                              ------      -----
                                                                (in millions)

Net realized investment and other gains (losses) .......      $(20.6)     $20.6
Less amortization of deferred policy acquisition costs
    related to net realized investment gains ...........        (0.8)      (1.3)
Add amounts credited (charged) to participating pension
    contract holder accounts ...........................        (2.3)       2.1
                                                              ------      -----
Net realized investment and other gains (losses), net of
    related amortization of deferred policy acquisition
    costs and amounts credited to participating pension
    contract holders  per unaudited consolidated
    financial statements (1) ...........................       (23.7)      21.4
Less realized investment gains attributable to
    mortgage securitizations and mezzanine
    funds ..............................................        (2.5)      (1.8)
                                                              ------      -----
Realized investment and other gains (losses),
    net - pre-tax adjustment to calculate segment
    operating income ...................................       (26.2)      19.6
Less income tax effect .................................        11.4       (8.4)
                                                              ------      -----
Realized investment and other gains (losses),
    net - after-tax adjustment to calculate segment
    operating income ...................................      $(14.8)     $11.2
                                                              ======      =====

(1)   Net realized investment and other gains, net of related amortization of
      deferred policy acquisition costs and amounts credited to participating
      pension contract holders for the three months ended March 31, 2001 and
      2000, respectively, includes $2.7 million and $3.1 million in net realized
      gains generated in the closed block. This balance is included in
      contribution from the closed block in the unaudited consolidated financial
      statements.

      The Company incurred after-tax restructuring charges to reduce costs and
increase future operating efficiency by consolidating portions of our
operations. Additional information regarding restructuring costs is included in
Note 3 - Severance in the notes to the unaudited consolidated financial
statements. After-tax restructuring costs were $15.0 million, including $9.0
million from the sale of our retirement plan record-keeping business, for the
three months ended March 31, 2001 and $6.9 million for the three months ended
March 31, 2000.

      During 1999, we recorded an amount related to the transfer of certain
assets from the Guaranteed and Structured Financial Products Segment to the
corporate account within the Corporate and Other Segment. The $5.7 million
after-tax credit occurring in the first quarter of 2000 is a change in estimate
of this transaction based on information that became available in 2000.

      In December 2000, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position (SOP) 00-3, "Accounting by Insurance
Enterprises for Demutualizations and Formations of Mutual Insurance Holding
Companies and Certain Long-Duration Participating Contracts." The SOP, which was
adopted with respect to accounting for demutualization expenses by the Company
on December 15, 2000, requires that demutualization related expenses be
classified as a single line item within income from continuing operations and
should not be classified as an extraordinary item. The adoption of SOP 00-3
resulted in the reclassification of demutualization expenses previously recorded
as an extraordinary item for the three months ended March 31, 2000 of $13.7
million (net of tax of $2.3 million). No demutualization costs were recognized
in 2001. The Company considers demutualization expenses to be an adjustment to
GAAP recorded net income.

      The Company incurred after-tax charges for demutualization related
expenses to improve our financial analysis and financial reporting abilities.
These charges primarily included consulting fees and planning and expense
management costs. After-tax charges for demutualization related expenses were
$10.2 million for the three months ended March 31, 2000. No such costs were
incurred in 2001.


                                       27
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Retail-Protection Segment

      The following table presents certain summary financial data relating to
the Protection Segment for the periods indicated.

                                                           Three months ended
                                                                 March 31,
                                                             2001        2000
                                                           -------------------
                                                               (in millions)

Revenues (1) ........................................      $834.9       $771.2

Benefits and expenses ...............................       721.9        663.4

Income taxes ........................................        40.4         35.2
                                                           -------------------

Segment after-tax operating income (1) ..............        72.6         72.6
                                                           -------------------

After-tax adjustments: (1)
  Realized investment and other gains
    (losses), net ...................................        (5.5)         4.8
  Demutualization expenses ..........................          --         (2.6)
  Other demutualization related costs ...............          --         (6.7)
  Restructuring charges .............................        (1.2)        (3.0)
                                                           -------------------
Total after-tax adjustments .........................        (6.7)        (7.5)
                                                           -------------------

GAAP Reported:
Income before cumulative effect
  of accounting changes .............................        65.9         65.1
Cumulative effect of accounting
  changes, net of tax ...............................        11.7           --
                                                           -------------------
Net income ..........................................      $ 77.6       $ 65.1
                                                           ===================

Other Data:
Segment after-tax operating income:
  Non-traditional life (variable and universal life).      $ 31.1       $ 26.2
  Traditional life ..................................        25.5         34.5
  Individual long term care .........................        12.3          8.8
  Group long term care ..............................         5.7          3.2
  Other .............................................        (2.0)        (0.1)
                                                           -------------------
Segment after-tax operating income (1) ..............      $ 72.6       $ 72.6
                                                           ===================

(1)   See "Adjustments to GAAP Reported Net Income" included in this MD&A.

Three Months Ended March 31, 2001 Compared to Three Months Ended March 31, 2000

      Segment after-tax operating income was $72.6 million for the three months
ended March 31, 2001, which was no change from $72.6 million for the three
months ended March 31, 2000. Non-traditional life insurance business after-tax
operating income increased $4.9 million, or 18.7%, primarily due to increased
mortality and interest margin gains. Traditional life insurance business
after-tax operating income decreased $9.0 million, or 26.1%, primarily resulting
from higher amortization of deferred policy acquisitions costs related to
revised estimates resulting from the implementation of new modeling systems.
Individual long term care insurance business after-tax operating income
increased $3.5 million, or 39.8%, resulting from lower expenses, higher
investment income, and positive morbidity gains driven by the growth in
business. Group long-term care insurance business after-tax operating income
increased $2.5 million, or 78.1%, due to improved morbidity, reduced surrender
losses and growth in interest margins.


                                       28
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

      Revenues were $834.9 million for the three months ended March 31, 2001, an
increase of $63.7 million, or 8.3%, from $771.2 million for the three months
ended March 31, 2000. Premiums increased $40.1 million, or 10.7%, primarily due
to retail long term care insurance premiums, which increased $42.8 million, or
47.2%, driven by continued growth overall in the business and the business
related to the Fortis acquisition completed March 1, 2000. Partially offsetting
this increase was a decline in traditional life insurance premiums of $4.9
million, or 1.9%, driven by a decrease in direct term life insurance premiums
due to Regulation XXX price increases and the continued trend away from whole
life insurance products. Universal life and investment-type product charges
consist primarily of cost of insurance fees and separate account fees and were
$102.0 million for the three months ended March 31, 2001, a decrease of $9.3
million, or 8.4%, from $111.3 million for the three months ended March 31, 2000.
This decrease was due primarily to the variable life insurance products, which
decreased by $11.7 million, or 12.3%, from the comparable prior year period,
driven by market depreciation on assets under management. Segment net investment
income increased $30.7 million, or 10.8%, primarily due to increased asset
balances and improved portfolio yields.

      Benefits and expenses were $721.9 million for the three months ended March
31, 2001, an increase of $58.5 million, or 8.8%, from $663.4 million for the
three months ended March 31, 2000. Benefits to policyholders increased $38.6
million, or 9.1%, due to growth in the retail long term care business driven by
the Fortis acquisition. Retail long term care benefits and expenses increased
primarily due to additions to reserves for premium growth and higher claim
volume on expansion of the business and lower lapse rates during the period.
Other operating costs and expenses decreased $5.0 million, or 5.2%, primarily
due to a decrease of $4.5 million in operating expenses on non-traditional life
insurance products mainly attributable to a increase in the deferral of deferred
policy acquisition costs. Dividends to policyholders decreased $6.0 million, or
4.9%, primarily due to decreased dividends on traditional life insurance
products. Amortization of deferred policy acquisition costs increased $31.0
million, or 140.9%, due to increased amortization resulting from revised
estimates related to the implementation of new deferred policy acquisition cost
modeling systems in both the traditional and non-traditional products. The
Segment's effective tax rate on operating income was 35.8% and 32.7% for the
three months ended March 31, 2001 and 2000, respectively.


                                       29
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Retail-Asset Gathering Segment

      The following table presents certain summary financial data relating to
the Asset Gathering Segment for the periods indicated.

                                                             Three months ended
                                                                 March 31,
                                                            2001          2000
                                                           --------------------
                                                               (in millions)

Revenues (1) .......................................       $288.9        $297.4

Benefits and expenses ..............................        242.0         242.8

Income taxes .......................................         15.4          18.3
                                                           --------------------

Segment after-tax operating income (1) .............         31.5          36.3
                                                           --------------------

After-tax adjustments: (1)
  Realized investment and other
    gains, net .....................................          4.6           1.2
  Demutualization expenses .........................           --          (0.6)
  Other demutualization related costs ..............           --          (1.4)
  Restructuring charges ............................        (13.2)         (0.9)
                                                           --------------------
Total after-tax adjustments ........................         (8.6)         (1.7)
                                                           --------------------

GAAP Reported:
Income before cumulative effect
  of accounting changes ............................         22.9          34.6
Cumulative effect of accounting changes ............         (0.5)           --
                                                           --------------------
Net income .........................................       $ 22.4        $ 34.6
                                                           ====================

(1) See "Adjustments to GAAP Reported Net Income" included in this MD&A.

Three Months Ended March 31, 2001 Compared to Three Months Ended March 31, 2000

      Segment after-tax operating income was $31.5 million for the three months
ended March 31, 2001, a decrease of $4.8 million, or 13.2%, from $36.3 million
reported in the comparable prior year period. Annuity business after-tax
operating income was $20.2 million for the three months ended March 31, 2001, an
decrease of $5.6 million, or 21.7%, primarily due to increased amortization of
deferred policy acquisition costs resulting from revised estimates related to
the implementation of new deferred policy acquisition cost modeling systems, and
reduced fees on variable annuity products due to depreciation of the equity
markets in the quarter. Fixed annuities spreads increased 12 basis points to
1.98% for the three months ended March 31, 2001 from 1.86% for the three months
ended March 31, 2000. The average interest credited rate increased 40 basis
points to 6.14% from 5.74%, while the earned interest rate increased 52 basis
points to 8.12% from 7.60%. Mutual funds after-tax operating income increased
$3.0 million, or 26.3%, primarily due to lower operating expenses that decreased
$9.9 million, or 17.9% from the comparable prior year period.

      Revenues were $288.9 million for the three months ended March 31, 2001, a
decrease of $8.5 million, or 2.9%, from $297.4 million reported for the
comparable prior year period. The decreased revenue was due to lower management
advisory fees and commission income primarily from the mutual funds business,
which decreased $30.3 million, or 23.9%, from the comparable prior year period
due to a decrease in weighted assets under management between the two periods.
Net investment income was $119.8 million for the three months ended March 31,
2001, an increase of $17.2 million, or 16.8%, from $102.6 million reported in
the comparable prior year period. Net investment income increased primarily


                                       30
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

due to increases in invested assets backing fixed annuity products, reflecting
higher market interest rates on new fixed income investments. Investment-type
product fees were $32.8 million for the three months ended March 31, 2001, a
decrease of $2.8 million, or 7.9%, from $35.6 million reported for the
comparable prior year period. The decrease in investment-type product fees is
primarily due to a decline in the average variable annuity reserves, driven by
depreciation of the equity markets, which decreased 12.8% to $6,780.6 million
for the three months ended March 31, 2001 from $7,780.0 million reported in the
comparable prior year period. For retail annuities, the mortality and expense
fees as a percentage of average account balances were 1.29% and 1.39% for the
three months ended March 31, 2001 and 2000, respectively.

      Investment management revenues, commissions, and other fees were $115.3
million for the three months ended March 31, 2001, a decrease of $35.7 million,
or 23.6%, from $151.0 million for the comparable prior year period. Average
mutual fund assets under management were $30,560.3 million for the three months
ended March 31, 2001, a decrease of $2,313.0 million or 7.0%, from $32,873.3
million reported in the comparable prior year period, due to market
depreciation. The mutual fund business experienced net deposits for the three
months ended March 31, 2001 of $260.6 million compared to net redemptions of
$304.0 million in the comparable prior year period, an improvement of $564.6
million, or 186%, primarily due to a decrease in redemptions of $732.6 million,
or 37.8%, despite difficult market conditions. Deposits and reinvestments for
the first quarter of 2001 include the funding of a $246 million institutional
advisory account. Investment advisory fees were $46.1 million for the three
months ended March 31, 2001, a decrease of $1.7 million, or 3.5%, from $47.8
million reported in the comparable prior year period and were 0.60% and 0.58% of
average mutual fund assets under management for the three months ended March 31,
2001 and 2000, respectively. Underwriting and distribution fees decreased $33.2
million, or 36.0%, to $59.0 million for the three months ended March 31, 2001,
primarily due to a decrease in front end load charge mutual fund sales, lower
deferred sales charges due to decreased redemptions, and accordingly, commission
revenue. Shareholder service and other fees were $10.2 million for the three
months ended March 31, 2001 compared to $12.5 million reported in the comparable
prior year period.

      Benefits and expenses decreased $0.8 million, or 0.3%, to $242.0 million
for the three months ended March 31, 2001 from $242.8 million reported in the
comparable prior year period. Benefits to policyholders increased $25.7 million,
or 32.2%, primarily due to an increase in interest credited on fixed annuity
account balances due to higher average account balances. Other operating costs
and expenses decreased $34.7 million, or 23.5%, to $113.1 million for the three
months ended March 31, 2001 from $147.8 million reported in the comparable prior
year period. The decrease was primarily due to the decrease in commission fees
incurred in the mutual fund business, the result of lower front-end load charge
mutual fund sales and lower deferred sales charges due to lower redemptions. In
addition, mutual fund operating expenses decreased due to operating
efficiencies, lower subadvisory asset based fees due to a decline in assets
under management, and the sale of the retirement plan record-keeping business.
Amortization of deferred policy acquisition costs increased $8.3 million, or
55.0%, to $23.4 million for the three months ended March 31, 2001 from $15.1
million reported in the comparable prior year period, primarily due to increased
amortization resulting from revised estimates relating to the implementation of
new deferred policy acquisition cost modeling systems in the annuity business.
The Segment's effective tax rate on operating income was 32.8% and 33.5% for the
three months ended March 31, 2001 and 2000, respectively.


                                       31
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Institutional-Guaranteed and Structured Financial Products Segment

      The following table presents certain summary financial data relating to
the Guaranteed and Structured Financial Products Segment for the periods
indicated.

                                                           Three months ended
                                                               March 31,
                                                             2001          2000
                                                        ------------------------
                                                             (in millions)

Revenues (1) ...................................         $  859.3      $  486.2

Benefits and expenses ..........................            770.7         402.0

Income taxes ...................................             29.6          29.0
                                                        ------------------------

Segment after-tax operating income (1) .........             59.0          55.2
                                                        ------------------------

After-tax adjustments: (1)
  Realized investment and other gains
    (losses), net ..............................             (8.2)         (4.7)
  Restructuring charges ........................             (0.1)         (2.1)
  Demutualization expenses .....................               --          (0.6)
  Other demutualization related costs ..........               --          (1.6)
  Corporate account asset transfer .............               --           5.7
                                                        ------------------------
Total after-tax adjustments ....................             (8.3)         (3.3)
                                                        ------------------------

GAAP Reported:
Income before cumulative effect of
  accounting changes ...........................             50.7          51.9
Cumulative effect of accounting
  changes, net of tax ..........................             (1.2)           --
                                                        ------------------------
Net income .....................................         $   49.5      $   51.9
                                                        ========================

Other Data:
Segment after-tax operating income:
  Spread-based products:
    GICs and funding agreements ................         $   40.0      $   35.4
    Single premium annuities ...................             12.3          12.0
  Fee-based products ...........................              6.7           7.8
                                                        ------------------------
Segment after-tax operating income (1) .........         $   59.0      $   55.2
                                                        ========================

(1) See "Adjustments to GAAP Reported Net Income" included in this MD&A.

Three Months Ended March 31, 2001 Compared to Three Months Ended March 31, 2000

      Segment after-tax operating income was $59.0 million for the three months
ended March 31, 2001, an increase of $3.8 million, or 6.9%, from $55.2 million
reported in the comparable prior-year period. Spread-based product after-tax
operating income was $52.3 million, an increase of $4.9 million, or 10.3%, from
$47.4 million reported in the comparable prior year period, primarily due to
increased investment spreads largely as a result of growth in the average asset
base of $2.8 billion to $19.9 billion. GICs and funding agreements accounted for
67.8% of segment after-tax operating income for the three months ended March 31,
2001 as compared to 64.1% in the comparable prior period. On a total-company
basis, GICs and funding agreements accounted for 21.0% of after-tax operating
income for the three months ended March 31, 2001 as compared to 17.2% in the
comparable prior period. Fee-based product after-tax operating


                                       32
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

income was $6.7 million, a decrease of $1.1 million, or 14.1%, from $7.8 million
reported in the comparable prior year period, primarily due to lower asset-based
fees on Separate Account GICs.

      Revenues increased $373.1 million, or 76.7%, to $859.3 million for the
three months ended March 31, 2001 from $486.2 million reported in the comparable
prior year period, largely due to a $332.9 million increase in premiums. Single
Premium Annuity premiums improved $343.0 million to $355.3 million primarily due
to two large sales in the period. Terminal Funding premiums decreased by $10.6
million to $4.7 million, and Structured Settlement premiums decreased by $2.7
million to $11.5 million from the comparable prior period. Investment-type
product charges were $15.0 million for the three months ended March 31, 2001, a
decrease of $2.0 million, or 11.8%, primarily due to lower expense recoveries
from participating contracts. Investment-type product charges were 0.52% and
0.55% of average fee-based policy reserves for the three months ended March 31,
2001 and 2000, respectively. Net investment income increased $42.5 million, or
10.0%, for the three months ended March 31, 2001 compared to the prior year
period, primarily as a result of a higher level of average invested assets
backing spread-based products. Average invested assets backing spread-based
products increased $2,806.7 million, or 16.4% to $19,918.2 million for the three
months ended March 31, 2001 from $17,111.5 million reported in the comparable
prior year period. The average investment yield on these invested assets
decreased to 8.49% for the three months ended March 31, 2001 compared to 8.58%
reported in the prior year period, reflecting the lower interest rate
environment in the current period.

      Benefits and expenses increased $368.7 million, or 91.7%, to $770.7
million for the three months ended March 31, 2001 from $402.0 million reported
in the comparable prior year period. The increase was largely due to a $370.4
million increase in benefits to policyholders as a result of increased sales of
single premium annuity contracts which increased annuity reserves by $304.4
million combined with interest credited on account balances for spread-based
products, which was $319.8 million for the three months ended March 31, 2001, an
increase of $42.1 million, or 15.2%, from $277.7 million reported in the
comparable prior year period. The increase in interest credited was due to an
increase in average account balances for spread-based products of $2,534.9
million to $18,810.1 million for the three months ended March 31, 2001 from
$16,275.2 million reported in the comparable prior year period combined with an
increase in the average interest credited rate on account balances for
spread-based products, which was 7.08% for the three months ended March 31, 2001
compared to 7.00% reported in the prior year period. The increase in the average
interest credited rate on account balances for spread-based products was due to
the increased average interest crediting rate on GICs and funding agreements.
Other operating costs and expenses were $12.4 million for the three months ended
March 31, 2001, a decrease of $2.9 million, or 19.0%, from $15.3 million
reported in the comparable prior year period. The decrease was primarily due to
lower compensation expenses and lower systems expenses related to projects
completed during 2000. Dividends of $8.8 million for the three months ended
March 31, 2001, increased $1.3 million, or 17.3%, from $7.5 million reported in
the comparable prior year period, reflecting a higher level of distributable
surplus to participating contract holder accounts. The Segment's effective tax
rate on operating income was 33.4% and 34.4% for the three months ended March
31, 2001 and 2000, respectively. This decrease in the effective tax rate is
primarily due to increases in certain tax credits and deductions in the current
period.


                                       33
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Institutional-Investment Management Segment

      The following table presents certain summary financial data relating to
the Investment Management Segment for the periods indicated.

                                                             Three months ended
                                                                 March 31,
                                                               2001         2000
                                                            --------------------
                                                               (in millions)

Revenues (1) ..........................................       $35.6        $79.2

Benefits and expenses .................................        26.5         43.1

Income taxes ..........................................         3.7         14.7
                                                            --------------------

Segment after-tax operating income (1) ................         5.4         21.4
                                                            --------------------

After-tax adjustments: (1)
  Realized investment and other gains, net ............        (0.1)          --
  Restructuring charges ...............................        (0.4)          --
                                                            --------------------
Total after-tax adjustments ...........................        (0.5)          --
                                                            --------------------

GAAP Reported:
Income before cumulative effect of
  accounting changes ..................................         4.9         21.4
Cumulative effect of accounting changes ...............        (0.2)          --
                                                            --------------------
Net income ............................................       $ 4.7        $21.4
                                                            ====================

(1) See "Adjustments to GAAP Reported Net Income" included in this MD&A.

Three Months Ended March 31, 2001 Compared to Three Months Ended March 31, 2000

      Segment after-tax operating income was $5.4 million for the three months
ended March 31, 2001, a decrease of $16.0 million, or 74.8%, from $21.4 million
reported in the comparable prior year period. The decrease was primarily due to
lower investment advisory fees.

      Revenues decreased $43.6 million, or 55.1%, to $35.6 million for the three
months ended March 31, 2001 from $79.2 million reported in the comparable prior
year period. Net investment income was $5.5 million for the three months ended
March 31, 2001, a decrease of $0.1 million from reported in the comparable prior
year period. Investment management revenues, commissions, and other fees
decreased $43.9 million, or 61.4%, for the three months ended March 31, 2001,
primarily due to a decrease in investment advisory fees, which decreased $43.4
million to $26.5 million for the three months ended March 31, 2001 compared to
$69.9 million reported in the prior year period. The decrease in investment
advisory fees was primarily due to a $35.5 million incentive fee receipt in
connection with the restructuring of a timber management contractand a $4.8
million performance fee received by the mezzanine fund manager during the first
quarter 2000, while the balance came from lower assets under management in the
segment. Investment advisory fees were 0.34% and 0.71% of average advisory
assets under management in 2001 and 2000, respectively. Mortgage origination and
servicing fees were $1.1 million for the three months ended March 31, 2001
compared to $1.6 million in 2000. Net realized investment and other gains
increased $0.8 million for the three months ended March 31, 2001, primarily due
to a larger collateralized mortgage-backed securitization in the first quarter
of 2001 as compared to the first quarter of 2000.


                                       34
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

      Benefits and expenses were $26.5 million for the three months ended March
31, 2001, a decrease of $16.6 million, or 38.5%, from $43.1 million reported in
the comparable prior year period. The decrease was primarily due to a $12.3
million incentive compensation payment related to the receipt of the incentive
fee on the timber management contract and a $2.7 million performance fee paid
for the management of the mezzanine fund during the first quarter 2000. Other
operating costs and expenses were 0.34% and 0.43% of average advisory assets
under management in 2001 and 2000, respectively. The Segment's effective tax
rate on operating income was 40.0% and 40.7% for the three months ended March
31, 2001 and 2000, respectively. The effective tax rate for the Institutional
Investment Management Segment is higher than our other business segments due to
the state tax on certain subsidiaries.

Corporate and Other Segment

      The following table presents certain summary financial data relating to
the Corporate and Other Segment for the periods indicated.

                                                            Three months ended
                                                                 March 31,
                                                             2001          2000
                                                          ---------------------
                                                                 (in millions)

Revenues (1) .......................................       $365.0        $465.6

Benefits and expenses ..............................        341.3         440.3

Income taxes .......................................          1.7           5.4
                                                          ----------------------

Segment after-tax operating income (1) .............         22.0          19.9
                                                          ----------------------

After-tax adjustments: (1)
  Realized investment and other gains
    (losses), net ..................................         (5.6)          9.9
  Restructuring charges ............................         (0.1)         (0.9)
  Demutualization expenses .........................           --          (9.9)
  Other demutualization related costs ..............           --          (0.5)
                                                          ----------------------
Total after-tax adjustments ........................         (5.7)         (1.4)
                                                          ----------------------

GAAP Reported:
Income before cumulative effect of
  accounting changes ...............................         16.3          18.5
Cumulative effect of accounting
  changes, net of tax ..............................         (2.6)           --
                                                          ----------------------
Net income .........................................       $ 13.7        $ 18.5
                                                          ======================

(1) See "Adjustments to GAAP Reported Net Income" included in this MD&A.

Three Months Ended March 31, 2001 Compared to Three Months Ended March 31, 2000

      Segment after-tax operating income from international operations was $18.1
million for the three months ended March 31, 2001, an increase of $15.0 million
from $3.1 million reported in the comparable prior year period. The increase in
segment after-tax operating income is primarily due to The Maritime Life
Assurance Company, an indirect majority owned Canadian subsidiary of the
Company. Individual Life experienced favorable expense, mortality and investment
margins and Group Insurance benefited from rate strengthening, favorable claims
experience and reinsurance programs that were put in place in 2000.


                                       35
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

      Segment after-tax operating income from corporate operations was $2.1
million for the three months ended March 31, 2001, a decrease of $15.3 million
from $17.4 million reported in the comparable prior year period. The decrease
was primarily due to nonrecurring investment income on the proceeds from the IPO
in the first quarter of 2000 as well as lower investment income on corporate
surplus due to greater surplus requirements in our other business lines.

      The Segment's effective tax rate on operating income was 7.2% and 21.3%
for the three months ended March 31, 2001 and 2000, respectively. This rate
decreased primarily due to a reduction in Maritime's deferred tax liability to
reflect decreased Canadian tax rates and a decrease in the deferred tax
liability associated with contracts entered into to transfer the management of
certain lease investment residuals to a foreign jurisdiction.

General Account Investments

      On the effective date of the Plan of Reorganization, the Company's
invested assets were allocated between the closed block and operations outside
the closed block. In view of the similar asset quality characteristics of the
major asset categories in the two portfolios, the invested assets in the closed
block have been combined with the Company's invested assets outside the closed
block for purposes of the following discussion and analysis.

Overall Composition of the General Account

      Invested assets, excluding separate accounts, totaled $53.8 billion and
$52.2 billion as of March 31, 2001 and December 31, 2000, respectively. The
portfolio composition has not significantly changed at March 31, 2001 as
compared to December 31, 2000. The following table shows the composition of
investments in our general account portfolio.

<TABLE>
<CAPTION>
                                            As of March 31,           As of December 31,
                                                2001                         2000
                                        ---------------------------------------------------
                                         Carrying        % of       Carrying      % of
                                           Value        Total         Value       Total
                                        ---------------------------------------------------
                                             (in millions)              (in millions)
<S>                                      <C>            <C>         <C>            <C>
Fixed maturity securities (1) .....      $35,200.3       65.4%      $32,573.4       62.4%
Mortgage loans (2) ................       10,960.7       20.4        10,900.0       20.9
Real estate .......................          528.6        1.0           519.0        1.0
Policy loans(3) ...................        1,977.3        3.7         1,969.2        3.8
Equity securities .................        1,356.3        2.5         1,372.3        2.6
Other invested assets .............        1,336.6        2.5         1,393.7        2.6
Short-term investments ............          239.8        0.4           214.0        0.4
Cash and cash equivalents (4) .....        2,223.9        4.1         3,280.0        6.3
                                         ---------      -----       ---------      -----
    Total invested assets .........      $53,823.5      100.0%      $52,221.6      100.0%
                                         =========      =====       =========      =====
</TABLE>

(1)   In addition to bonds, the fixed maturity security portfolio contains
      redeemable preferred stock with a carrying value of $757.4 million and
      $735.3 million as of March 31, 2001 and December 31, 2000, respectively.
      Carrying value is composed of investments categorized as held-to-maturity,
      which are carried at amortized cost, and investments categorized as
      available-for-sale, which are carried at fair value. The total fair value
      of our fixed maturity security portfolio was $35,172.8 and $32,393.5
      million, at March 31, 2001 and December 31, 2000, respectively.

(2)   The fair value for our mortgage loan portfolio was $11,545.0 and $11,359.6
      million as of March 31, 2001 and December 31, 2000, respectively.

(3)   Policy loans are secured by the cash value of the underlying life
      insurance policies and do not mature in a conventional sense, but expire
      in conjunction with the related policy liabilities.

(4)   Cash and cash equivalents are included in total invested assets for the
      purposes of calculating yields on the income producing assets for the
      Company. Cash and cash equivalents are not considered part of Total
      Investments as shown of the Company of $51,599.6 million and $48,941.6
      million at March 31, 2001 and December 31, 2000, respectively. Closed
      block Total Investments of $8,510.3 million and $8,203.2 million as of
      March 31, 2001 and December 31, 2000, respectively, are presented in
      closed block assets on the Consolidated Balance Sheets but remain part of
      the Company's total invested assets.


                                       36
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

      Consistent with the nature of our product liabilities, our assets are
heavily oriented toward fixed maturity securities. We determine the allocation
of our assets primarily on the basis of cash flow and return requirements of our
products and secondarily by the level of investment risk.

Fixed Maturity Securities. Our fixed maturity securities portfolio is
predominantly comprised of low risk, investment grade, publicly and privately
traded corporate bonds and senior tranches of asset-backed securities (ABS) and
mortgage-backed securities (MBS), with the balance invested in government bonds.
Our fixed maturity securities portfolio also includes redeemable preferred
stock. As of March 31, 2001, fixed maturity securities represented 65.4% of
general account investment assets with a carrying value of $35.2 billion,
roughly comprised of 53% public securities and 47% private securities. Each year
we direct the majority of our net cash inflows into investment grade fixed
maturity securities. We typically invest between 10% and 15% of funds allocated
to fixed maturity securities in below-investment-grade bonds while maintaining
our policy to limit the overall level of these bonds to no more than 10% of
invested assets and two-thirds of that balance in the BB category. Allocations
are based on our assessment of relative value and the likelihood of enhancing
risk-adjusted portfolio returns. While the general account has profited from the
below-investment-grade asset class in the past, care is taken to manage its
growth strategically by limiting its size relative to our net worth.

      The following table shows the composition by issuer of our fixed maturity
securities portfolio.

                     Fixed Maturity Securities -- By Issuer

<TABLE>
<CAPTION>
                                                                As of March 31,        As of December 31,
                                                                     2001                     2000
                                                            -----------------------------------------------
                                                              Carrying    % of       Carrying      % of
                                                               Value     Total        Value       Total
                                                            -----------------------------------------------
                                                               (in millions)            (in millions)
<S>                                                          <C>         <C>        <C>            <C>
Corporate securities..................................       $27,737.8    78.8%     $25,193.6       77.4%
MBS/ABS...............................................         5,747.9    16.3        5,483.5       16.8
U.S. Treasury securities and obligations of
   U.S. government agencies...........................           139.9     0.4          205.8        0.6
Debt securities issued by foreign
   Governments........................................         1,429.5     4.1        1,549.9        4.8
Obligations of states and political
   Subdivisions.......................................           145.2     0.4          140.6        0.4
                                                             ---------   -----      ---------      -----
      Total...........................................       $35,200.3   100.0%     $32,573.4      100.0%
                                                             =========   =====      =========      =====
</TABLE>

      Our MBS and ABS holdings, in keeping with our investment philosophy of
tightly managing interest rate risk, are heavily concentrated in commercial MBS
where the underlying loans are largely call protected, which means they are not
pre-payable without penalty prior to maturity at the option of the issuer,
rather than in residential MBS where the underlying loans have no call
protection. By investing in MBS and ABS securities with relatively predictable
repayments, we add high quality, liquid assets to our portfolios without
incurring the risk of excessive cash flow in periods of low interest rates or a
cash flow deficit in periods of high interest rates. We believe the portion of
our MBS/ABS portfolio subject to prepayment risk as of March 31, 2001 and
December 31, 2000 was limited to 11.2% and 3.3% of our total MBS/ABS portfolio
and 1.8% and 0.6% of our total fixed maturity securities holdings, respectively.
The increase is due to a $500 million portfolio in a new duration neutral
strategy used in the corporate investment segment as a liquid alternative to a
cash portfolio.

      The Securities Valuation Office (SVO) of the National Association of
Insurance Commissioners evaluates all public and private bonds purchased as
investments by insurance companies. The SVO assigns one of six investment
categories to each security it reviews. Category 1 is the highest quality
rating,


                                       37
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

and Category 6 is the lowest. Categories 1 and 2 are the equivalent of
investment grade debt as defined by rating agencies such as S&P and Moody's
(i.e., BBB-/Baa3 or higher), while Categories 3-6 are the equivalent of
below-investment grade securities. SVO ratings are reviewed and may be revised
at least once a year.

      The following table sets forth the SVO ratings for our bond portfolio
along with an equivalent S&P rating agency designation. The majority of our
bonds are investment grade, with 87.4% invested in Category 1 and 2 securities
as of March 31, 2001. As a percent of total invested assets, our below
investment grade bonds, at 8.1% as of March 31, 2001, are higher than the
American Council of Life Insurers (ACLI) industry average of 5.9%, last
published as of December 31, 1999. This allocation reflects our strategy of
avoiding the unpredictability of interest rate risk in favor of relying on our
bond analysts' ability to better predict credit or default risk. Our bond
analysts operate in an industry-based, team-oriented structure that permits the
evaluation of a wide range of below investment grade offerings in a variety of
industries resulting in a well-diversified high yield portfolio. A majority
(63.5%) of our below investment grade bonds are in category 3, the highest
quality below investment grade. Category 6 bonds, those in or near default,
represent securities that were originally acquired as long-term investments, but
subsequently became distressed. The carrying value of bonds in or near default
was $227.7 million and $216.7 million as of March 31, 2001 and December 31,
2000, respectively. For the three months ended March 31, 2001 and 2000, $6.9
million and $4.0 million of net investment income on bonds in or near default
was recognized in net investment income, respectively. As of March 31, 2001 and
December 31, 2000, $4.7 million and $2.6 million of interest on bonds in or near
default was included in accrued investment income, respectively. It is the
Company's policy to reverse any accrued investment income and cease accruing
interest income on bonds in default and accrue interest income on bonds near
default that the Company expects to collect.

                 Fixed Maturity Securities -- By Credit Quality

<TABLE>
<CAPTION>
                                                         As of March 31,                   As of December 31,
                                                ------------------------------------------------------------------------
                                                              2001                                2000
                                                ------------------------------------------------------------------------
      SVO                S&P Equivalent              Carrying          % of            Carrying             % of
   Rating (1)           Designation (2)             Value (3)          Total          Value (3)            Total
------------------------------------------------------------------------------------------------------------------------
                                                   (in millions)                     (in millions)
      <S>       <C>                                   <C>               <C>            <C>                   <C>
      1         AAA/AA/A.....................         $16,941.4          49.2%         $14,614.2              45.9%
      2         BBB..........................          13,152.9          38.2           12,877.8              40.5
      3         BB...........................           2,760.6           8.0            2,793.3               8.8
      4         B............................           1,001.4           2.9            1,066.4               3.3
      5         CCC and lower................             358.9           1.0              269.7               0.8
      6         In or near default...........             227.7           0.7              216.7               0.7
                                                ------------------------------------------------------------------------
                Total........................         $34,442.9         100.0%         $31,838.1             100.0%
                                                ========================================================================
</TABLE>

(1)   With respect to securities that are awaiting an SVO rating, we have
      assigned a rating based on an analysis that we believe is equivalent to
      that used by the SVO.

(2)   Comparisons between SVO and S&P ratings are published by the National
      Association of Insurance Commissioners.

(3)   Does not include redeemable preferred stock with a carrying value of
      $757.4 million and $735.3 million as of March 31, 2001 and December 31,
      2000, respectively.

      Mortgage Loans. As of March 31, 2001 and December 31, 2000, we held
mortgage loans with a carrying value of $11.0 billion and $10.9 billion,
respectively, including $2.6 billion and $2.5 billion of agricultural loans,
respectively, and $1.2 billion and $1.2 billion of loans managed by Maritime,
respectively, of which $0.6 billion respectivelywere government-insured by the
Canada Mortgage and Housing Corporation (CMHC).


                                       38
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Investment Results

      The following table summarizes the Company's investment results for the
periods indicated. Overall, the yield, net of investment expenses, on our
general account portfolio decreased by 64 basis points from the first quarter of
the prior year. The lower yield was the result of old assets rolling over into
new investments with less favorable interest rates and narrower acquisition
spreads than those present in our 2000 fixed maturity portfolio. The inflow of
new cash was invested at rates that were less than the overall portfolio
earnings rate during the first quarter of 2000. Indicative of this environment,
between March 2000 and March 2001, the 10-year U.S. Treasury rate fell 137 basis
points to 4.89%, while Moody's seasoned BAA spreads fell by 53 basis points to
7.84%.

<TABLE>
<CAPTION>
                                                           As of               As of
                                                       March 31, 2001       March 31, 2000
                                                 -------------------------------------------------
                                                    Yield      Amount    Yield       Amount
                                                 -------------------------------------------------
                                                            (in millions)         (in millions)
<S>                                                 <C>       <C>         <C>      <C>
General account assets-excluding policy loans
  Gross income                                      7.72%     $   984.7   8.58%    $ 1,010.0
  Ending assets-excluding policy
    Loans                                                      51,846.2             47,385.8
Policy loans
  Gross income                                      6.33%          31.2   6.07%         29.6
  Ending assets                                                 1,977.3              1,947.0
  Total gross income                                7.66%       1,015.9   8.48%      1,039.6
    Less: investment expenses                                     (65.5)               (82.1)
                                                              ---------            ---------
      Net investment income (1)                     7.17%     $   950.4   7.81%    $   957.5
                                                              =========            =========
</TABLE>

(1)   Total Company net investment income of $950.4 million and $957.5 million
      for the period ended March 31, 2001 and 2000, respectively, is discussed
      in the Management's Discussion and Analysis, which includes net investment
      income of $781.4 million and $848.6 million in the unaudited consolidated
      statements of income and $169.0 million and $108.9 million in Note 5 -
      Closed Block to the unaudited consolidated financial statements for the
      three months ended March 31, 2001 and 2000, respectively.


                                       39
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Liquidity and Capital Resources

      Liquidity describes the ability of a company to generate sufficient cash
flows to meet the cash requirements of business operations. John Hancock
Financial Services, Inc. is an insurance holding company. The assets of JHFS
consist of the outstanding capital stock of John Hancock Life Insurance Company
(the Life Company) and a portion of the net proceeds of our initial public
offering (the offering), and investments in international subsidiaries. The
amount of net offering proceeds retained by JHFS was $105.7 million. JHFS cash
flow consists of dividends from its subsidiaries and investment returns on the
$105.7 million in invested net proceeds of the offering retained by it, offset
by expenses. As a holding company, JHFS ability to meet its cash requirements,
pay interest on any debt, pay expenses related to its affairs and pay dividends
on its common stock substantially depends upon dividends from its subsidiaries.

      State insurance laws generally restrict the ability of insurance companies
to pay cash dividends in excess of prescribed limitations without prior
approval. The Life Company's limit is the greater of 10% of the statutory
surplus or the prior calendar year's statutory net gain from operations of the
Life Company. The ability of the Life Company, JHFS' primary operating
subsidiary, to pay shareholder dividends is and will continue to be subject to
restrictions set forth in the insurance laws and regulations of Massachusetts,
its domiciliary state. The Massachusetts insurance law limits how and when the
Life Company can pay shareholder dividends. The Life Company, in the future,
could also be viewed as being commercially domiciled in New York. If so,
dividend payments may also be subject to New York's holding company act as well
as Massachusetts' law. JHFS currently does not expect such regulatory
requirements to impair its ability to meet its liquidity and capital needs.
However, JHFS can give no assurance it will declare or pay dividends on a
regular basis. No such dividends were declared or paid in the three months ended
March 31, 2001 or 2000.

      In March 2001, the Commissioner of Insurance for the Commonwealth of
Massachusetts approved, and the Life Company paid, dividends to JHFS in the
amount of $250.0 million. None of this dividend was classified as extraordinary
by state regulators. The funds from these dividends, together with the net
proceeds of the offering, were principally used to repurchase $125.8 million in
JHFS common stock.

      Sources of cash for the Company's insurance subsidiaries are from
premiums, deposits and charges on policies and contracts, investment income,
maturing investments, and proceeds from sales of investment assets. In addition
to the need for cash flow to meet operating expenses, our liquidity requirements
relate principally to the liabilities associated with various life insurance,
annuity, and structured investment products, and to the funding of investments
in new products, processes, and technologies. Product liabilities include the
payment of benefits under life insurance, annuity and structured investment
products and the payment of policy surrenders, withdrawals and policy loans. The
Company periodically adjusts its investment policy to respond to changes in
short-term and long-term cash requirements and provide adequate funds to pay
benefits without forced sales of investments.

      The liquidity of our insurance operations is also related to the overall
quality of our investments. As of March 31, 2001, $30,094.3 million, or 87.4% of
the fixed maturity securities held by us and rated by Standard & Poor's Ratings
Services, a division of the McGraw-Hill Companies, Inc. (S&P) or the National
Association of Insurance Commissioners were rated investment grade (BBB or
higher by S&P or 1 or 2 by the National Association of Insurance Commissioners).
The remaining $4,348.6 million, or 12.4%, of fixed maturity investments, and
8.0% of invested assets, were rated non-investment grade. For additional
discussion of our investment portfolio see the General Account Investments
section above in this Management's Discussion and Analysis of Financial
Condition and Results of Segment Operations.

      We employ an asset/liability management approach tailored to the specific
requirements of each of our product lines. Each product line has an investment
strategy based on the specific characteristics of the liabilities in the product
line. As part of this approach, we develop investment policies and operating
guidelines for each portfolio based upon the return objectives, risk tolerance,
liquidity, and tax and regulatory requirements of the underlying products and
business segments.


                                       40
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

      Net cash provided by operating activities was $429.9 million and $261.5
million for the three months ended March 31, 2001 and 2000, respectively. The
increase in 2001 compared to 2000 was primarily due to the initial cash transfer
to the closed block of $158.6 million during the first quarter of 2000 which did
not recur in the current period.

      Net cash used in investing activities was $1,547.9 million and $299.8
million for the three months ended March 31, 2001 and 2000, respectively. The
increase in cash used in 2001 as compared to 2000 resulted from increased
acquisitions of fixed maturities during the three months ended March 31, 2001
related to the comparable prior year period, while the issuance of mortgage
loans on real estate continued to increase.

      Net cash provided by financing activities was $70.1 million and $76.8
million, for the three months ended March 31, 2001 and 2000, respectively. The
decrease in 2001 as compared to 2000 resulted from a reduction in cash payments
made on withdrawals of universal life insurance and investment-type contracts
and increased deposits on such contracts. This activity was partially offset by
non-recurring cash activity related to the IPO in the first quarter of 2000. In
addition, the Company used $125.8 million in cash to acquire treasury stock
during the first quarter of 2001; this was partially offset by the increase in
issued commercial paper of $20.3 million.

      On October 26, 2000, the Company announced that its Board of Directors
authorized a stock repurchase program, with no termination date, under which the
Company will purchase up to $500 million of its outstanding common stock. Under
the stock repurchase program, purchases will be made from time to time,
depending on market conditions, business opportunities and other factors, in the
open market or through privately negotiated transactions, and which may be, if
deemed appropriate, through a systematic program. During the three months ended
March 31, 2001, the Company repurchased 3.6 million shares with a total cost of
$125.7 million. Since the inception of the Program, the Company has repurchased
6.6 million shares with a total cost of $217.5 million.

      Cash flow requirements also are supported by a committed line of credit of
$1.0 billion. The line of credit agreement provides for two facilities: one for
$500 million pursuant to a 364-day commitment (subject to renewal) and a second
for $500 million pursuant to a five-year facility. The line of credit is
available for general corporate purposes. The line of credit agreement contains
various covenants, among these being that shareholders' equity meet certain
requirements. To date, we have not borrowed any amounts under the line of
credit.

      As of March 31, 2001, we had $799.7 million of debt outstanding consisting
of $265.6 million of debt classified as short term and $534.1 million classified
as long term, including $447.2 million of surplus notes. A new commercial paper
program has been established at JHFS that will ultimately replace the commercial
paper program now in place at its indirect subsidiary, John Hancock Capital
Corporation. During the three months ended March 31, 2001, $50.0 million in
commercial paper was issued by JHFS and none was outstanding at March 31, 2001.

      The risk-based capital standards for life insurance companies, as
prescribed by the National Association of Insurance Commissioners, establish a
risk-based capital ratio comparing adjusted surplus to required surplus for each
of our United States domiciled insurance subsidiaries. If the risk-based capital
ratio falls outside of acceptable ranges, regulatory action may be taken ranging
from increased information requirements to mandatory control by the domiciliary
insurance department. The risk-based capital ratios of all our insurance
subsidiaries as of year end were above the ranges that would require regulatory
action.

      We maintain reinsurance programs designed to protect against large or
unusual losses. Based on our review of our reinsurers' financial statements and
reputations in the reinsurance marketplace, we believe that our reinsurers are
financially sound, and, therefore, that we have no significant exposure to
uncollectable reinsurance in excess of uncollectable amounts already recognized
in our unaudited consolidated financial statements.


                                       41
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

      Given the historical cash flow of our subsidiaries and current financial
results, management believes that the cash flow from the operating activities
over the next year will provide sufficient liquidity for our operations, as well
as to satisfy debt service obligations and to pay other operating expenses.
Although we anticipate that we will be able to meet our cash requirements, we
can give no assurances in this regard.

   Important Factors that May Affect Future Results

      The statements, analyses, and other information contained herein relating
to trends in the Company's operations and financial results, the markets for the
Company's products, the future development of the Company's business, and the
contingencies and uncertainties to which the Company may be subject, as well as
other statements including words such as "anticipate," "believe," "plan,"
"estimate," "expect," "intend," "will," "should," "may," and other similar
expressions, are "forward-looking statements" under the Private Securities
Litigation Reform Act of 1995. Such statements are made based upon management's
current expectations and beliefs concerning future events and their effects on
the Company, which may not be those anticipated by management. John Hancock's
actual results may differ materially from the results anticipated in these
forward-looking statements.

      These forward-looking statements are subject to risks and uncertainties
including, but not limited to, the risks that (1) a significant downgrade in our
ratings for claims-paying ability and financial strength may lead to policy and
contract withdrawals and materially harm our ability to market our products; (2)
elimination of Federal tax benefits for our products and other changes in laws
and regulations (including in particular the possible amendment or repeal of the
Federal Estate Tax) which the Company expects would adversely affect sales of
our insurance and investment advisory products; (3) as a holding company, we
depend on dividends from our subsidiaries and the Massachusetts insurance law
may restrict the ability of John Hancock Life Insurance Company to pay dividends
to us; (4) we face increasing competition in our retail and institutional
businesses from mutual fund companies, banks and investment management firms as
well as from other insurance companies; (5) a decline or increased volatility in
the securities markets, and other economic factors, may adversely affect our
business, particularly our variable life insurance, mutual fund, variable
annuity and investment business; (6) our life insurance sales are highly
dependent on a third party distribution relationship; (7) customers may not be
responsive to new or existing products or distribution channels, (8) interest
rate volatility may adversely affect our profitability; (9) our net income and
revenues will suffer if customers surrender annuities and variable and universal
life insurance policies or redeem shares of our open-end mutual funds; (10) the
independent directors of our variable series trusts and of our mutual funds
could reduce the compensation paid to us or could terminate our contracts to
manage the funds; (11) under our Plan of Reorganization, we were required to
establish the closed block, a special arrangement for the benefit of a group of
our policyholders, and we may have to fund deficiencies in our closed block, and
any overfunding of the closed block will benefit only the holders of policies
included in the closed block, not our stockholders; (12) there are a number of
provisions in our Plan of Reorganization, our Restated Certificate of
Incorporation and by-laws, laws applicable to us, agreements that we have
entered into with our senior management, and our stockholder rights plan, that
will prevent or discourage takeovers and business combinations that our
stockholders might otherwise consider to be in their best interests; (13) we
will face losses if the claims on our insurance products, or reductions in rates
of mortality on our annuity products, are greater than we projected; (14) we
face risks relating to our investment portfolio; (15) the market price of our
common stock may decline if persons who received common stock as compensation in
the reorganization sell their stock in the public market; (16) we may experience
volatility in net income due to changes in standards for accounting for
derivatives and other changes; (17) our United States insurance companies are
subject to risk-based capital requirements and possible guaranty fund
assessments; (18) the National Association of Insurance Commissioners'
codification of statutory accounting practices will adversely affect the
statutory surplus of John Hancock Life Insurance Company; (19) we may be unable
to retain personnel who are key to our business; (20) we face risks from assumed
reinsurance business in respect of personal accident insurance and the
occupational accident component of workers compensation insurance; (21)
litigation and regulatory proceedings may result in financial losses, harm our
reputation and divert management resources, and (22) we face unforeseen
liabilities arising from our acquisitions and dispositions of businesses.


                                       42
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

      Readers are also directed to other risks and uncertainties discussed, as
well as to further discussion of the risks described above, in other documents
filed by the Company with the United States Securities and Exchange Commission.
The Company specifically disclaims any obligation to update or revise any
forward-looking information, whether as a result of new information, future
developments, or otherwise.


                                       43
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

ITEM 3. QUANTITATIVE and QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Capital Markets Risk Management

      The Company maintains a disciplined, comprehensive approach to managing
capital market risks inherent in its business operations. To mitigate these
risks, and effectively support Company objectives, investment operations are
organized and staffed to focus investment management expertise on specific
classes of investments, with particular emphasis placed on private placement
markets. In addition, a dedicated unit of asset / liability risk management
(ALM) professionals centralizes the implementation of its interest rate risk
management program. As an integral component of its ALM program, derivative
instruments are used in accordance with risk reduction techniques established
through Company policy and with formal approval granted from the New York
Insurance Department. The Company's use of derivative instruments is monitored
on a regular basis by senior management and reviewed quarterly with the
Company's Committee of Finance.

      The Company's principal capital market exposures are credit and interest
rate risk, although we have certain exposures to changes in equity prices and
foreign currency exchange rates. Credit risk pertains to the uncertainty
associated with the ability of an obligor or counterparty to continue to make
timely and complete payments of contractual principal and/or interest. Interest
rate risk pertains to the market value fluctuations that occur within fixed
maturity securities or liabilities as market interest rates move. Equity and
foreign currency risk pertain to price fluctuations, associated with the
Company's ownership of equity investments or non-US dollar denominated
investments, driven by dynamic market environments.

Credit Risk

      The Company manages the credit risk inherent in its fixed maturity
securities by applying strict credit and underwriting standards, with specific
limits regarding the proportion of permissible below investment grade holdings.
We also diversify our fixed maturity securities with respect to investment
quality, issuer, industry, geographical, and property-type concentrations. Where
possible, consideration of external measures of creditworthiness, such as
ratings assigned by nationally recognized rating agencies, supplement our
internal credit analysis. The Company uses simulation models to examine the
probability distribution of credit losses to ensure that it can readily
withstand feasible adverse scenarios. In addition, the Company periodically
examines, on various levels of aggregation, its actual default loss experience
on significant asset classes to determine if the losses are consistent with the
(1) levels assumed in product pricing, (2) ACLI loss experience and (3) rating
agencies' quality-specific cohort default data. These tests have generally found
the Company's aggregate experience to be favorable relative to these external
benchmarks and consistent with priced for levels.

      As of March 31, 2001, the Company's fixed maturity portfolio was comprised
of 87.4% investment grade securities and 12.6% below-investment-grade
securities. These percentages are consistent with recent experience and
indicative of the Company's long-standing investment philosophy of pursuing
moderate amounts of credit risk in return for higher expected returns. We
believe that credit risk can be successfully managed given our proprietary
credit evaluation models and experienced personnel.

Interest Rate Risk

      The Company maintains a tightly controlled approach to managing its
potential interest rate risk. Interest rate risk arises from many of our primary
activities, as we invest substantial funds in interest-sensitive assets to
support the issuance of our various interest-sensitive liabilities, primarily
within our Protection, Asset Gathering and Guaranteed & Structured Financial
Products Segments.

      We manage interest rate sensitive segments of our business, and their
supporting investments, under one of two broadly defined risk management methods
designed to provide an appropriate matching of assets and liabilities. For
guaranteed rate products, where contractual liability cash flows are highly
predictable (e.g., GICs or immediate annuities) we apply sophisticated
duration-matching techniques to manage the segment's exposure to both parallel
and non-parallel yield curve movements. Typically this


                                       44
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

type of management is expressed as a duration mismatch tolerance of only +/- .05
years, with other measures used for limiting exposure to non-parallel risk. For
non-guaranteed rate products, such as whole life insurance or single premium
deferred annuities, liability cash flows are less predictable. Therefore, a
conventional duration-matching strategy is less effective at managing the
inherent risk. For these products, we manage interest rate risk based on
scenario-based portfolio modeling that seeks to identify the most appropriate
investment strategy given probable policyholder behavior and liability crediting
needs under a wide range of interest rate environments.

      As of March 31, 2001, there have been no material changes to the interest
rate exposures as reported in the Company's 2000 Form 10-K.

Derivative Instruments

      The Company uses a variety of derivative financial instruments, including
swaps, caps, floors, and exchange traded futures contracts, in accordance with
Company policy. Permissible derivative applications include the reduction of
economic risk (i.e., hedging) related to changes in yields, price, cash flows,
and currency exchange rates. In addition, certain limited applications of
"income generation" are allowed. Examples of this type of use include the
purchase of call options to offset the sale of embedded options in Company
liability issuance or the purchase of swaptions to offset the purchase of
embedded put options in certain investments. The Company does not make a market
or trade derivatives for the purpose of speculation.

      The Company's Investment Compliance Unit monitors all derivatives activity
for consistency with internal policies and guidelines. All derivatives trading
activity is reported monthly to the Company's Committee of Finance for review,
with a comprehensive governance report provided jointly each quarter by the
Company's Derivatives Supervisory Officer and Chief Investment Compliance
Officer. The table below reflects the Company's derivative positions that are
managing interest rate risk as of March 31, 2001. The notional amounts in the
table represent the basis on which pay or receive amounts are calculated and are
not reflective of credit risk. These exposures represent only a point in time
and will be subject to change as a result of ongoing portfolio and risk
management activities.

<TABLE>
<CAPTION>
                                                                      As of March 31, 2001
                                  -----------------------------------------------------------------------------------------
                                                                                             Fair Value
                                                                    -------------------------------------------------------
                                                      Weighted
                                    Notional        Average Term       -100 Basis Point        As of       +100 Basis Point
                                     Amount            (Years)              Change            3/31/01            Change
                                     ------            -------              ------            -------            ------
                                                         (in millions, except for Weighted Average Term)
<S>                                   <C>                <C>                <C>               <C>              <C>
Interest rate swaps.........          $10,670.8           8.0               $(569.9)          $(334.4)         $(102.1)
CMT swaps...................              491.3           1.4                   0.9               0.9              1.0
Futures contracts (1).......            1,291.9           9.6                 (23.7)              1.5             22.7
Interest rate caps..........              321.6           3.0                   0.8               2.1              4.5
Interest rate floors........            8,328.0           9.4                 152.2              66.6             33.8
Swaptions...................               30.0          24.2                  (2.7)             (1.1)            (0.4)
                                  --------------                      --------------------------------------------------
      Totals................          $21,133.6           8.4               $(442.4)          $(264.4)          $(40.5)
                                  ==============                      ==================================================
</TABLE>

----------
(1)   Represents the notional value on open contracts as of March 31, 2001.

      Our non-exchange-traded derivatives are exposed to the possibility of loss
from a counterparty failing to perform its obligations under terms of the
derivative contract. We believe the risk of incurring losses due to
nonperformance by our counterparties is remote. To manage this risk, Company
procedures include the (a) on-going evaluation of each counterparty's credit
ratings, (b) the application of credit limits and monitoring procedures based on
an internally developed, scenario-based, risk assessment system, (c) monthly
reporting of each counterparty's "potential exposure", (d) master netting
agreements and, where appropriate, (e) collateral agreements. Futures contracts
trade on organized exchanges and, therefore, have effectively no credit risk.


                                       45
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

PART II OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Reference is made to Item 3. Legal Proceedings in the Company's 2000 Form 10-K
under the subsection, Harris Trust Litigation, for additional information
concerning such litigation. On April 11, 2001, the court in the Harris Trust
litigation entered a judgment against John Hancock for approximately $84.9
million, which includes damages to plaintiff, pre-judgment interest, attorneys'
fees and other costs. John Hancock believes that the case was wrongly decided,
denies that its actions have violated ERISA in any way, and intends to appeal.
Notwithstanding what John Hancock believes to be the merits of its position in
this case, John Hancock is unable to predict the outcome of its appeal. Even if
unsuccessful on appeal, however, in John Hancock's opinion, its ultimate
liability would not be material in relation to its financial position or
liquidity.

ITEM 6. EXHIBITS and REPORTS on FORM 8-K

(a)   Exhibits

Exhibit
Number                       Description
------                       -----------

10.1  Letter Agreement Concerning Employment, Termination of Employment and
      Related Affiliation with Stephen L. Brown

18.1  Letter re change in accounting principle

b) Reports on Form 8-K.

There were no reports on Form 8-K required to be filed during the period covered
by this report.


                                       46
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                    JOHN HANCOCK FINANCIAL SERVICES, INC.


Date:  May 15, 2001                 By: /s/ Thomas E. Moloney
                                        ----------------------------------
                                        Thomas E. Moloney
                                        Chief Financial Officer


                                       47
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

                                  EXHIBIT INDEX

Exhibit
Number    Description
------    -----------

10.1      Letter Agreement Concerning Employment, Termination of Employment and
          Related Affiliation with Stephen L. Brown

18.1      Letter re change in accounting principle

                                       48